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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: A. Edwards who wrote (2453)	4/9/1999 1:25:00 PM
From: SJS	Read Replies (1) \| Respond to of 4710

From Briefing.com __________________ VITESSE SEMICONDUCTOR (VTSS) 51 -6 5/8. This designer of high bandwidth communications chips is losing value today, not so much because earnings were not sufficient to please investors, but because bookings could slump as the company's biggest customer utilizes other manufacturers. According to Vitesse, it recorded a fiscal Q2 net of $0.22 a share, a penny ahead of the First Call estimate, and 46% ahead of year-ago profit. Revenues for the quarter rose 66% to $66.9 million. However, CEO Louis Tomasetta said that Lucent Technologies (LU 63 3/8 -9/16), the company's biggest customer, was beginning to outsource its manufacturing needs to other companies, and the perception is that this could lead to lower bookings in future quarters that makes it hard for Vitesse to meet current earnings expectations. Even with today's price drop, the stock is still trading at near 58 times 1999 projected earnings of $0.88 and 41 times 2000 earnings estimates of $1.24 a share. At such lofty multiples, Vitesse has little room for error. If bookings are not expanding as rapidly as had been hoped for, and if the time between order and delivery is being shorten, then the company is likely to operate with less of a safety net going forward, raising the volatility of earnings flows. This is something that investors do not like to see and the main reason that the stock is trading lower. But given that earnings visibility may be more cloudy now, the stock could still trade lower given current multiple assumptions.