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Technology Stocks : Broadcom (BRCM) -- Ignore unavailable to you. Want to Upgrade?

To: Daniel Hsu who wrote (1048)	3/7/1999 2:00:00 PM
From: Kevin Kessel	Read Replies (1) \| Respond to of 6531

Merrill Lynch makes positive comments about Broadcom after Level-One Acquisition: The report below is in pdf format, you will need acrobat reader. research2.mlol.ml.com I have also pasted it below. Kevin Level One Communications Inc. – 5 March 1999 Intel's decision to acquire Level One is good news not only for Level, but for communications IC companies in general Level One Communications has agreed to be purchased by Intel in a stock-for-stock transaction that values Level One at about $2.2 billion, or $48.75 per share at yesterday's closing prices. Under the terms of the proposed deal, Intel will exchange each outstanding share of LEVL stock for 0.43 shares of Intel stock, which will result in Intel issuing approximately 18.6 million additional shares. The deal values Level's stock at approximately 80% more than yesterday's closing share price. LEVL's analog and mixed-signal expertise is valuable Our positive stance on Level One has been based in large part on our belief that LEVL's analog, mixed-signal and digital signal processing skills are increasingly valuable in a semiconductor industry that is focused on supplying the high-growth communications equipment market. We have noted that developing analog and mixed-signal expertise is extremely difficult – hiring qualified personnel is difficult and developing products can take a long time. Lots of deals during the past year – the market appears to agree with us The market appears to be rendering a similar verdict. During the past year we've seen a number of companies decide to purchase analog and mixed-signal expertise, often at lofty valuations. Cases in point include National Semiconductor's purchase of Comcore, LSI Logic's purchase of Seeq Technology, and Applied Micro Circuits' purchase of Cimaron yesterday. Intel also recently tied up with Analog Devices (ADI, $26 9/16, C-2-1-9)in order to co-develop a DSP architecture with that company. The message is clear – participating in high-growth communications-oriented semiconductor markets requires the right skill sets, and the market value of those skill sets is rising. Implications of the deal for Broadcom (BRCM, $48, C-1-1-9) are positive, not negative We have noted a tendency in situations such as these to look for losers as well as winners. Any change in competitive environment does of course generate losers, but we think that the overwhelming message that the market is sending now is a positive one for companies with analog and signal processing skill sets. We have been recommending Broadcom on the basis of that company's strength not only in local area networking products, but also other rapidly growing end markets such as digital set-top boxes and cable modems. Competing in each of those end markets requires cutting-edge skills in analog and signal processing, and Broadcom has those skills in abundance. We don't think that Broadcom's value or competitive position has in any way been compromised by the Intel/Level One deal, and we reiterate our intermediate-term and long-term Buy ratings on that stock. We reiterate our enthusiasm for Analog Devices, PMC Sierra (PMCS, $71 ½, C-2-1-9) and Vitesse Semiconductor (VTSS, $49 ¼, C-2-1-9) as well Similarly, Analog Devices received a vote of confidence from Intel recently when Intel tied up with Analog in order to co-develop a new DSP architecture. That fact that Intel, with its enormous resources and logic design expertise, elected to work with an outside company to develop DSP technology illustrates both the value of Analog's skills in analog and DSP, and the difficulty of developing DSP technology independently. Other companies that we've been recommending include PMC Sierra and Vitesse Semiconductor. We think that the Intel/Level One deal reflects positively on those companies' franchises as well, although both companies are somewhat less focused on the analog and signal processing components of the communications semiconductor market. We reiterate our intermediate-term Accumulate ratings for both companies.