STOCKREPORTS

VLSI Technology, Inc.

Nasdaq Symbol VLSI In S&P SmallCap 600

Recent Price 22.00 52 Wk Range 26.25 - 11.25

Yield Nil 12-Mo. P/E NM

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) 4- Fair Value 23.30 Risk HIGH Earn/Div Rank B-
Technical Evaluation: BULLISH since 04/97 Rel. Strength Rank (1 Lowest - 99 Highest) 38 Insider Activity NA

Overview 24-APR-97

We believe revenues will grow a little less than 10% in 1997, as X86 core logic semiconductors, which now account for less than 10% of revenues, will no longer be a drag on top line growth. It is impressive that VLSI has reported flat sales in 1996, considering the fact that its X86 business shrunk substantially. Revenue growth will be driven by strength in the satellite box-top, GSM (wireless communications) and video entertainment markets. The majority of the revenue growth will occur in the second half of the year, when consumer electronic markets, which are now a critical part of the company's sales base, are seasonally strong. Margins will get a substantial boost from the recently announced closing of the company's San Jose wafer fabrication plant, as well as the changes in the product mix. Overall, we look for VLSI to earn $1.05 a share in 1997. Excluding charges to account for expenses related to the closing of the San Jose facility, VLSI earned $0.47 a share in 1996.

Valuation 24-APR-97

We have lowered our rating on VLSI to hold from accumulate. The downgrade reflects concerns that the company's growth prospects in 1997 are too closely tied to the consumer market. Demand for end-products in consumer markets can be volatile, and there have been recent reports that sales of satellite TV systems have been slowing. This could reduce the sales of VLSI's chips that are used in the manufacture of set-top boxes. Therefore, we have lowered our 1997 EPS estimate for the second time in as many quarters. With the stock trading at approximately 18x our 1997 EPS estimate, we don't believe the shares have a lot of upside potential over the next 6 months.

Key Stock Statistics

Fiscal Year Ending Dec. 31

Dividend Data: No cash has been paid.

Business Summary 24-APR-97

VLSI Technology manufacturers semiconductors, or integrated circuits (ICs), that are used in the manufacture of rapidly growing electronic products that enhance lives at home and work, including mobile computers, wireless communications devices, electronic games and digital set-top boxes. VLSI's products allow these products to be made faster, smaller and cheaper. ICs manufactured by LSI include application specific integrated circuits (ASICs), custom designed chips for individual customers; and application-specific standard products (ASSPs), semi-custom chips designed for a particular market application that may be used by several customers.

Target markets for VLSI are the computing, consumer electronics and consumer digital entertainment markets. VLSI focuses its marketing efforts on leading original equipment manufacturers (OEMs) in these markets. VLSI attempts to design and manufacture highly integrated complex semiconductor devices that allow its customers to develop and bring to market higher value-added systems and products. VLSI seeks to develop ICs that will allow customers to differentiate their products from competitors and reduce product costs.

The communications segment serves wireless and network customers. Wireless solutions are provided through the use of baseband signal processing technology developed to support various wireless voice and and data standards, including GSM, PHS and DECT. Networking solutions include digital cross-connect, transmission, networking/internetworking, switching and multiplexing. The consumer digital entertainment segment targets high volume entertainment related markets, including set-top boxes for satellite and cable TV, digital video disk, and electronic games.

The computing segment primarily serves workstations and mass storage systems. Over the past year, the company has begun to withdraw from the logic chip-set business, which at one time represented a significant portion of total revenues, due to the dominance of Intel Corporation in this business.

Through majority-owned COMPASS Design Automation, Inc., the company offers an integrated suite of electronic design automation (EDA) software tools and support services for use by systems and circuit designers at other semiconductor and systems design companies.

Capitalization

Long Term Debt: $205,709,000 (3/28/97).

Curr. Ratio	2.1	3.0	2.1	2.1	2.0	1.7	1.7	1.9	2.2	3.3
% LT Debt of Cap.	30.5	28.8	26.7	28.2	31.0	36.4	37.8	35.4	35.8	36.7
% Net Inc.of Revs.	NM	6.4	5.4	3.1	NM	2.4	NM	0.2	3.0	4.7
% Ret. on Assets	NM	6.4	6.9	4.0	NM	2.8	NM	0.2	2.3	3.5
% Ret. on Equity	NM	11.7	13.3	7.8	NM	6.2	NM	0.3	4.5	5.8

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. Data for 1993 refl. merger or acq. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--1109 McKay Dr., San Jose, CA 95131. Tel--(408) 434-3000. Fax--(408) 263-2511. Website--http://www.vlsi.com Chrmn & CEO--A. J. Stein. Pres & COO--R. M. Beyer. VP, Treas & Investor Contact--John C. Batty. Dirs--R. M. Beyer, P. S. Bonelli, R. P. Dilworth, W. G. Howard, P. R. Low, A. J. Stein, H. Tsiang. Transfer Agent & Registrar--Bank of Boston. Incorporated--in California in 1979; reincorporated in Delaware in 1987. Empl-- 3,000. S&P Analyst: Stephen T. Madonna, CFA

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997