1. Ready for the next pitch?

2. The Intersection of Vision and Value Paul McWilliams Editor, Next Inning Technology Research

3. NextInning.com Telecosm 2004 – The Intersection of Vision and Value The Intersection of Vision and Value is a focus at NextInning.com * Based on Next Inning Model Portfolio performance as of October 15, 2004 8% of gains 92% of gains 200+% total return* It’s where investors find big long-term gains and market-beating returns

4. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Goals of today's presentation Illustrate the importance of seeking value in vision Illustrate how finding companies that deliver value can be more important than timing cycles, but not imply that cycles can be completely ignored Present what I feel are common traits among companies that deliver value Illustrate the challenges faced in the quest for value Present an example of a semiconductor company I feel will leverage vision to create shareholder value during the Next Inning Make value more important in your investment process

5. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Not all Visionary companies deliver Value * Data from Yahoo! Finance

6. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Vision creates opportunity, but not necessarily Value Vision without value doesn’t pay very well -Linear Technology: Up 5,862% since 1990 -Cypress Semiconductor: Up 35% since 1990 -Cirrus Logic: Down 50% (can we really call this vision?) since 1990 Finding value can be more important than timing cycles -To realize the same gain as holding Linear Tech, a trader would have to make eight consecutive trades yielding 100% and, in each case, reinvest the entire yield from the previous trade* OR -34 consecutive trades yielding 20% without hitting a single loser* * Assumes trades are short-term capital gains taxed at 40% total and long-term capital gains are taxed at 25% total

7. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Recognizing Value is the challenge Sales Two year Growth Annualized P:E Ratio NTA/Share Company A $100.2M +100% 17.0:1 $7.56 Company B $55.8M +90% 24.7:1 $5.87 Let’s look at two companies both renowned for their vision in 1994: Which one would you pick as the better value?

8. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Company A: ten years at Cypress (CY) SOXX Index CY Market Cap 1 CY Stock Value 2 CY Net Tangible Assets (NTA) CY NTA/Share 8/31/94 134.9 $801M $9.88 $307M $7.56 8/31/04 371.2 $1,635M $9.76 $286M $1.71 Change +175.2% -1.2% -6.7% -84.5% +104.2% 1 Based on Fully Diluted Share count 2 Adjusted for Splits (1 X 2:1) While CY’s market cap doubled, its stockholders are sitting at a 1% loss after holding faith in the vision for 10 years

9. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Company B: ten years at Linear Technology (LLTC) SOXX Index LLTC Market Cap 1 LLTC Stock Value 2 LLTC Net Tangible Assets (NTA) LLTC NTA/Share 4 8/31/94 134.9 $1,642M $4.77 $223M $5.87 8/31/04 371.2 $11,374M $35.77 $1,811M $5.69 Change +175.2% +649.9% +712.1% -3.1% +588.5% 1 Based on fully diluted share count 2 Adjusted for dividend reinvestments and splits (3 X 2:1) 3 Adjusted for splits only (3 X 2:1) 4 Total dividends paid on a share purchase 8/31/94 equals $9.38 If added to NTA, the per share increase would equal 156.7% At the intersection of Vision and Value, you’ll find what I like to call: Quality Companies LLTC Stock Value 3 $5.44$35.77 +557.5%

10. NextInning.com Telecosm 2004 – The Intersection of Vision and Value The seven virtues of Value Market Potential (Vision) Fundamentals Management Stockholder Friendly Description Prospects of profitable and sustainable growth Adequate financing to avoid dilution and a clear vision of self-sustaining operations I would rather own a well run lemonade stand than a poorly run tech company Shareholder interests are not diluted with excessive options, acquisitions and / or convertible financing

11. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Three are commonly overlooked Differentiation Durability of Differentiation Operational Elegance Description Creates pricing power - the basis for profit Maintains pricing power and allows companies to annuitize short-term investments A high ratio of gross profit for each operational cost dollar invested: (gross profit / operating expenses)

12. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Looking Back: why would (and should) an investor have picked LLTC over CY in 1994? Management Fundamentals Market Stockholder Friendly Linear Tech Excellent Incremental Growth Very Good Cypress Excellent High Growth Good Differentiation Durability of Differentiation Operational Elegance Excellent Excellent - 2.73 Good Fair Good - 1.68 As you can see, Linear was simply better positioned to become a Quality Company

13. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Looking forward: finding the intersection of Vision and Value Companies large enough to have a record, fundamentals and management Companies small enough to where high growth is sustainable for a decade This type of potential is not reflected in the stock price – this is the primary challenge Differentiation and its Durability are key

14. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Intersil has the makings of a Quality Company Management Fundamentals Market Stockholder Friendly Intersil Potentially Excellent Excellent High Growth & Incremental Very Good Comments >$500M Debt to >$700M Cash in four years Strong Cash Flow and Balance Sheet $5 Billion to $6 Billion SAM Acquisitions, Share Repurchases and Options Differentiation Durability of Differentiation Operational Elegance Potentially Excellent Good - 1.69 Some Excellent, Some Good Leverage Programmability and Unique Technologies Model is 1.9 to 2.5 Intersil appears to be building the foundation of a Quality Company

15. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Intersil is Differentiated and this differentiation comes from Durable product lines Programmable elements -Resistors -Capacitors -Voltage reference Programmable analog Programmable mixed signal (PMS?) High speed operational amplifiers Power control and battery management High speed pure CMOS analog process on 130nm (270Mhz A/D)

16. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Intersil’s Operational strategy is a two pronged approach Application Specific Standard Products (ASSP) -Leverage differentiation to capture significant markets quickly Standard products -Miles Wide / Inches Deep - Slow growth, but very long life cycles and very high profits

17. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Intersil Model NowModel Gross Margin:58%58% to 62% Op/Ex Margin:34%27% to 30% Op/Inc Margin:23%28% to 35% Op/Elegance:1.691.93 to 2.48 Other Operational Elegance Ratios: Linear Tech: 3.60 Maxim: 2.59 Microchip: 2.41 Altera: 1.97 ADI: 1.94

18. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Five companies to noodle One to Two Year Plays Harmonic (HLIT) Video delivery systems for cable, telecom, satellite and broadcast Packeteer (PKTR) Applications, traffic management control essential for converged networks Three to Five Year Plays Catalyst (CATS) Well run commodity semiconductor company in the process of expanding into analog and mixed- signal – OE ratio 1.67:1 Intersil (ISIL) Leverage durable differentiation in high performance analog / mixed signal Texas Instruments (TXN) Strong set of IP for convergence theme

19. NextInning.com Telecosm 2004 – The Intersection of Vision and Value Thank You – Questions? http://www.nextinning.com paul@nextinning.com