GaAs Valley

Vitesse Semiconductor

Vitesse <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VTSS)") else Response.Write("(Nasdaq: VTSS)") end if %> designs, develops, manufactures, and markets a number of digital GaAs integrated circuits (ICs). The company's products incorporate its proprietary H-GaAs (high-integration gallium arsenide) technology to produce ICs primarily for telecommunications, data communications, and automated test equipment (ATE) systems providers.

In fiscal 1996, sales of telecommunications, data communications, and ATE products represented 52%, 8% and 24%, respectively, of the company's total revenues. This is strong evidence of Vitesse's market composition turnaround -- in 1992, 58% of the company's revenues came from the supercomputer industry. As one of the older, more seasoned companies in the segment its customer list is impressive, including the likes of Lucent, Alcatel, Credence, Ericsson, Schlumberger, Seagate, Tellabs, and Teradyne.

In the company's most recent quarter, bookings of $34.8 million (book-to-bill of 1.26) were extraordinarily strong, and represented the eighth consecutive quarter of 10% sequential revenue growth and the ninth consecutive quarter of a book-to-bill above 1.15. The company's new manufacturing facility in Colorado Springs is set to go online by the end of March 1998. This is a number of months sooner than the company had previously anticipated. Vitesse has the weight of tremendous growth expectations on its back as its new facility gets set for production. Analysts expect present trailing earnings of $0.14 per share to rise to $1.13 by the end of 1998 (5 quarters away), which gives the company a somewhat discounted valuation. If the company can continue to grow revenues at a 40% compound clip, Vitesse will exceed expectations.

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