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Technology Stocks : LSI Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Duane L. Olson who wrote (16781)	1/29/1999 7:34:00 PM
From: Jock Hutchinson	Read Replies (2) \| Respond to of 25814

I spoke with Robert Sisson of LSI IR today, and he clarified some points with me. First: The formal names of the six divisions are computer, storage components, storage systems, telecomm wireless, consumer, and networking. LSI really does believe that the storage component business helps them get up to speed in learning the storage business simply because they only had Fibre Channel in the past. The purpose of my call was to inquire into Mint, and I received the following information: Mint allows LSI to work with the customer on the early part of the design, which was not a previous option. Not all Mint customers use LSI for a fab, although the vast majority do, since there is often problems getting the designs to work when you work with a fabless design team and a foundry. Rather there is a more seamless integration with Mint and LSI. My impression is that Mint has about 100 employees, and my guess (not confirmed by Robert is that Mint is doing about 3 million is business, which will be able to grow at at least the industry standard of 40 % for the next few years. In short, in about three years, Mint will be perceived by the street as a hidden value kept on LSI's books at 3 million, when its actual value is 50 million. Thus, Mint has the potential to be a mini Cadence or Synopsys.) I asked about DCAM, and he mentioned that the ultimate market is 50 million cameras. Most of the digital stuff right now is used for PCs and most of that is VGA, which does not require LSI's chip—only the high end stuff does. However, when we go to the non-PC digital camera, then LSI's chip will be used simply because of the demand for quality. In adition to Konica, Minolta, and Casio, LSI also has Samsung. However, LSI will not have the 25% market penetration in DCAM that it currently has in DVD—which chip sells for about $35.00-which means that LSI grossed about $20 million last year and will gross $40 million this year—and could go as high as $350 million—assuming it retains its 25% share and doesn't decrease the price of its chip—which will not happen in a mature market. I asked him what has been a disappointment to date, and he answered that ATM has not yet taken off because Cisco keeps finding ways to extend Ethernet. The second answer he gave is cable modem because no one has really invested in the infrastructure yet. As such, these are two areas where R&D might be potentially shelved for the time being. Designs are being won at .18, but there is currently no production at .18, and the majority of product is still at .35. No glitches seen in Gresham. I told him that John Dahne (pronounced Day nah) needs to speak more slowly and to deliver his message more forcefully. LSI is acutely aware of the bad press that they have had the past two years, and as such they are trying to ratchet down expectations.