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Technology Stocks : IDTI - an IC Play on Growth Markets -- Ignore unavailable to you. Want to Upgrade?

To: David Tesorero who wrote (10172)	4/1/1999 10:59:00 PM
From: Samuel R Orr	Read Replies (2) \| Respond to of 11555

David, I hope you bought lots of AIG in 1988, and I wish I'd thought of it, too. The stock price increase disparity indicates several things: the insurance business is far easier to make a buck in than the semiconductor business(unless you're Intel with a copyright on the X86 microprocessor mask tooling and design); customers get a far better value buying PCs and other semiconductor products than they do buying Homeowners, Auto, Health, or Life Insurance policies. It's sort of odd, but I worked in both industries. When I finished my hitch in the navy, I worked for eighteen months learning to be a casualty insurance underwriter. With the advent of Sputnik, I returned to school to get a master's in physics and thereafter worked in the semiconductor industry. Well, the job was more fun than being a casualty underwriter, but profits were hard to come by. You can certainly knock IDTI's management, but AMD's, Cypress'(and I know and greatly respect TJ Rodger's intellect and quick mind), National Semiconductor's, Alliance Semiconductor's, and numerous similar firms had different management and are all in the tank. The Japanese, South Koreans, and Taiwanese build so much brick and mortar dedicated to semiconductors, that SRAM, DRAM and commodity IC's now sell with very small or non-existent profit margins. I keep expecting the industry, Phoenix-like, to again arise from the ashes, but my crystal ball doesn't have a quartz clock and calendar in it. To end the fun and games with an attempt to answer your question: AIG is rather obviously the better buy today, since its revenues and earnings growth have long been and probably will continue to be positive. Nevertheless, I'm not at all sure a decade from now when you have to hold a seance to get hold of me, that AIG will have grown another 13X. I wouldn't expect IDTI to, either, but it might have quadrupled from its present value. Looking at our bet on AOL vrs. IDTI, AOL's PE ratio was listed today at 682. With present earnings of $.22, I'll concede they may increase to $2.20 in a year or so, but that's still a PE of 68. It's hard to believe smart money is betting that way, but it is, and I find that gullibility extremely worrisome. Speculative bubbles historically have always burst. AIG looks fine to me, but even it is pricey at a PE of 33. Take care of yourself, and tell Matthew I'm looking forward to buying him a lunch. Sam