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

To: OldAIMGuy who wrote (2532)	5/19/1999 4:32:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 4710

definitely appears we three have somethin' in common. excluding vitesse, of course. whodathunkit'd be a once overpolluted cesspool? back to the topic at hand, here's an excerpt from yesterday's motley fool on GaAs. of course, as is typical, we're lumped in with the wireless boys. ----- The Lunchtime News May 18, 1999 FOOL PLATE SPECIAL An Investment Opinion by Alex Schay Return to Gallium Arsenide Valley Gallium Arsenide (GaAs) is a semiconductive material that can be used to make semiconductors in the place of silicon. A simple compound of the metallic element gallium, GaAs offers the promise of higher performance chips. Compared to silicon, the physical properties of gallium allow for higher electron mobility (up to five times faster than the substance associated with that California "valley"). As a consequence, GaAs integrated circuits operate at much higher speeds, or can operate at the same speeds with lower power consumption. The only problem is that the costs associated with producing the circuits will still exceed silicon by a substantial margin for the foreseeable future. In addition, the process technology is still hampered by uneven outcomes. Companies that peddle GaAs components must provide products with superior performance characteristics in order to fulfill the price/value proposition for customers. The key to success for GaAs manufacturers is to reduce unit production costs by increasing wafer fabrication yields, generating higher volumes, and getting costs down on raw wafer acquisition. Since commencing the month of April at $19 1/4 TriQuint Semiconductor (Nasdaq:TQNT), a GaAs chip manufacturer, has been on a tear moving up $3 to $33 today as Donaldson Lufkin & Jenrette put the firm on its vaunted "top pick" list this morning. Over the last two quarters, TriQuint has managed to accelerate design wins across virtually all of its product segments, and come in with some solid financial performance. Congestion in many of the traditionally-assigned frequency bands has led to an excellent environment for TriQuint with entirely new high volume applications at higher frequencies. While Nokia was the company's largest customer in 1998 with 12% of sales, 21 design wins in the fourth quarter (for phones and other wireless applications) have given the firm some much needed visibility in 1999, bolstered by the 95 total design wins in the first quarter (across all segments). Foundry revenues are expected to constitute approximately 25% of total revenues for 1999, and the company has some visibility in its telecom segment -- which has been depressed due to a wafer fab transition where the firm's main customer purchased excess inventory in anticipation of the new wafer fab coming on-line. With the company's run rate return on invested capital still below its weighted average cost of capital (WACC), it still has a quite a job to do in 1999. However, the firms product outlook is bright and costs of good sold (COGs) has been improving -- year-over-year COGs as a percentage of revenue in the first quarter decreased to 62.2% from 77.4%. Interested investors should stack the company's products up against its main competition -- Vitesse Semiconductor (Nasdaq:VTSS), Anadigics (Nasdaq:ANAD) and RF Microdevices (Nasdaq:RFMD) -- in order to get a clearer picture for 1999.