Dear Investor,

With declining sales and razor thin margins quickly becoming a stark reality for even the most proven semiconductor manufacturers, the search is on for solutions that help reduce costs and improve efficiencies.

In today’s edition, I’ll bring you up to speed on one of our favorite portfolio companies that is uniquely positioned to capitalize on a monumental market downturn by delivering technology that makes the semiconductor fabrication process more profitable and environmentally friendly. But first, what in the world is going on in the semiconductor space?

Troubled Global Economy Finally Sends Semi Space into the Red
After six years of steady growth, the SIA forecasts a substantial decline in 2009 global semiconductor sales. Citing a tumultuous global economic environment that is driving decreased PC and cell phone sales, the association expects a 5.9% plunge in the current quarter to be followed by a 5.6% dip next year.

Despite the SIA issuing optimistic 2010 forecasts, it’s quite evident that a market turnaround is by no means imminent given the current state of the global economy and the fact that not even the most highly esteemed economists have a clue when the hemorrhaging will subside.

Only the Strong Survive and LGYH is Showing Signs of Strength

As the old saying goes “only the strong survive”. This certainly holds true in cutthroat industries such as the semiconductor space. In order to stay strong and improve operating efficiencies, many leading players including Tyco, Micrel Systemsand Silicon Genesis have aligned themselves with portfolio company Legacy Holdings Inc. (OTCBB: LGYH).

The company was founded and is directed by Robert R. Matthews, a chemist with nearly 30 years of experience in the semiconductor industry with time spent as a process engineer at both Texas Instruments (NYSE: TXN) and Intel Corp. (NASDAQ: INTC).

“SIA Forecast: Semiconductor Sales Slowing”

Legacy Helps Semicon Leaders Do More with Less
By nature, Moore’s law keeps capital expenditures uniquely high throughout the semiconductor industry. Frequent upgrades to fabrication equipment are imperative in order for manufacturers to stay competitive. Moreover, with the credit market now bone dry, semiconductor-related organizations are increasingly being forced to get creative and do more with less.

Oddly enough, this dynamic creates an interesting opportunity for Legacy’s EPA Green Chemistry award-winning silicon wafer cleaning technology. For a point of reference here are a few data points regarding the industry’s struggle to remain profitable:

1. The capital cost to build and equip a semiconductor fabrication facility has risen from $6 million in 1970, to anywhere between $1B to $3B today;

2. A typical fab is equipped with several hundred equipment items that range in price from roughly $700,000 to $5,000,000;

3. Minor interruptions to the fab process can cost upwards of $1M;

4. Losses related to massive semiconductor fab contamination can range from $100M to $1.5B;

5. Daily costs associated with operating a fab are in the $3M+ range for leading players; and

6. Besides a few extremely large market players, the vast majority of manufacturers in the industry have been unable to remain profitable and have chosen to either collaborate or consolidate to produce on an economic scale.

LGYH Presents a Massive Value-Proposition to a $7B+ Marektplace

In addition to improving wafer processing time by 200% and enhancing oxide removal control by 92%, the company’s technology also decreases costs by 22% by reducing the amount of consumable materials used in wafer cleaning and reduces particles left on the wafer after cleaning by 76%. Given today’s troubled economic environment, these benefits qualify the technology as a no-brainer solution to many of the problems facing the industry today.

Legacy 10Q

Quarterly Results Positive amidst Backdrop of Negative Economic Trends
LGYH recently announced operating results for the 30-day period ending 9/30/08, which are fairly promising given the current troublesome global economic environment. Despite total costs and operating expenses being up nearly 80% on a quarterly year-over-year basis, Legacy’s performance over the first 9 months of 2008 has improved in a number of key areas.

Highlights of the filing include:

3-months ending 9/30/08 versus corresponding quarter of 2007

1. Revenue increased 1% from $87,543 to $88,474;

2. A 35% increase in General and Administrative costs ($42,332 to $57,283) largely driven by costs associated with transitioning from Pink Sheets to OTC Bulletin Board Exchange; and

3. Net loss of $70,985 vs. net loss of $14,600.

9 months ending 9/30/08 vs. corresponding 9 months of 2007

1. Revenues increased roughly 5% from $313,138 to $328,746;

2. Total costs and expenses decreased 10% from $207,037 to $185,475; and

3. Positive net income of $2,051 vs. net loss of $79,182.

“LGYH Delivers Repeat Order to Tyco”

Conclusion

Although quite resilient to economic slowdowns, the semiconductor industry, like all of the rest, is by no means impervious to global recession. However, with a little help from value-added solution providers such as LGYH, leading semiconductor players should be able to optimize their operations now and squeeze out smaller competitors during tough times thus setting the stage for easy growth once the economy rebounds in the future.

Thank you for being a loyal Outcast subscriber. We will continue to provide you valuable services.

Sincerely,
–The Team at Outcast

If ACLS breaks $0.75 this may cause a trend reversal over $0.80 and test the $1.00 mark! (more…)

Remember the Martha Stewart scandal?  You know, the one that sopped up all the negative press while prosecutors stammered on the Enron implosion.  Despite the many discrepancies in culpability, I still wonder when the rich and famous personalities and executives are going to learn that insider trading is like cutting off a hungry traffic cop.

Truth be told, I personally believe that Wall Street is so rife with insider trading that the SEC (Securities Exchange Commission) has to pick their battles.  But picking their battles is part of the strategy.  After all, by pursuing Susie homemakers like Martha Stewart and sports team owners, examples are made.

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While doing my job earlier (well, maybe just doing a little web surfing), I came across this article on Nexicon. Don’t know who pee’d in this guys Oatmeal, but he sure is no Nexicon fan. I think the fact the industry leader, Google (Nasdaq: GOOG) chose to use NXCO’s technology for thier YouTube property speaks for itself. Maybe a buddy of Larry Dignan’s buddy runs the company that came in second with GOOG . Who knows . . .

Click here to check it out —-> Google’s Favorite Penny Stock

Would you shoplift a copy of the newly released DVD that you’ve been dying to see from your local Circuit City (RIP), even if there wasn’t an employee in sight? Unless you’re a kleptomaniac or have an affinity for handcuffs, the answer is most likely no. On the other hand, most consumers wouldn’t blink an eyelash before illegally downloading a catchy new tune or that pricey spreadsheet software suite to their personal computer.

Supporting this statement, a 2007 study conducted by Solutions Research Group found that while 80% of respondents believed that stealing a DVD from a brick & mortar store was a serious offense, only 40% believed that illegally downloading the same film was just as serious. Moreover, the study also found that a total of 32 million Americans aged 12 or older have illegally downloaded a full-length movie sometime in the past.

Stealing is Stealing, Whether Online Or in PersonIn the eyes of the world’s record labels, motion picture studios, musicians and software companies; illegal media sharing is equally as criminal as shoplifting from a brick & mortar retail location. Online media piracy costs related industries billions of dollars each year and until recently, there hadn’t been much they could do to combat Internet piracy, at least not in a cost-effective manner. Fortunately for media companies, as technology matures, solutions are being developed that allow the industry to combat Internet piracy and convert copyright infringers into paying customers. Even more fortunately for the media industry, from time to time, some of the most talented hackers and most profitable online pirates cross over from the dark side and begin using their old tricks to catch the next generation of cyber crooks. “Product Info”

From Sinner to SaintOn such story is playing out inside the doors of Nexicon Inc. (OTCPK: NXCO). The company’s CTO, Tommy Stiansen, is a world-renowned computer hacker that is so talented, he ended providing security assessments for the U.S. government and a number of Fortune 500 companies. In addition to building a reputation for being able to pirate just about anything online, Mr. Stiansen has also developed the most comprehensive and cost-effective digital piracy solution available today. The program got its start as a telephone billing system in Norway and was first used by several major telephone companies to monitor more than 1 million subscribers. It was then re-engineered years later to monitor Internet traffic for billing purposes before eventually being enhanced to become a revolutionary anti-piracy platform that allows media companies to recoup revenues lost to illegal downloads. NXCO Overview

Converting Web Pirates to Paying Customers: How it works. In layman’s terms, NXCO’s anti-piracy platform works like this: The program utilizes proprietary peer-to-peer file sharing intelligence technology to mine for data across a global network of electronic agents. It monitors download activity through all types of known distribution methods such as BitTorrent, Ares, auctions, Gnutella, and newsgroups. Since a prolific hacker developed the platform, it knows where to look for downloading activity and does so on a massively large scale. Once data is received that suggests that a potential infringement is taking place, the system analyzes, rates, and confirms the threat with absolute certainty, reportedly at a rate that is 50X faster than the competition. Subsequent to the verification of an infringement, the platform produces a detailed report for the copyright holder/content originator that informs them about what files were pirated, when, and by whom. Lastly, NXCO’s solution turns piracy into profits by sending the infringing party’s ISP a notice and option to avoid legal action by paying a cash fine. The ISP is then legally obligated to forward this notice to the pirate and they can actually settle with the copyright holder for a nominal cash fee in less than 3 clicks. Talk about a soup to nuts solution! “Pirates no more on MySpace”

Partnership with YouTube, Contracts with Movie Studios Extremely PositiveIn addition to providing its anti-piracy solution to a number of major motion picture studios, NXCO also recently announced a partnership with YouTube.com under which the company will act as a 3rd party monitor over copyrighted material. If another party attempts to illegally utilize protected content, Nexicon will step in and demand payment, thus generating revenue for YouTube users. As YouTube.com garners widespread popularity throughout the world and continues to significantly expand its content library by the minute, a solution such as NXCO’s GetAmnesty program is an invaluable asset for the site and its users. The platform both protects and monetizes copyrighted media and also shields the website from potential legal disputes. By utilizing the solution, major media providers are no longer so hesitant to have their copyrighted material housed on YouTube.com because they are optimally compensated for everything posted on the site. Nexicon and YouTube(TM) Form Partnership

From our alert last week at $7.50 (NYSE:CIA) is currently zoning in on the $9 area resistance.  Our stop is slightly under the $8.50 mark (worst case you’ll lock in a dollar per share profit). CIA is at its highest point since the previous test of $9 and with a higher consolidation pattern than previous attempts. (more…)

Have you ever wondered why it is called a honeymoon?  Or why they say its “raining cats and dogs”?  Or why children across the country hang the symbolic equivalent of an old sock on the fireplace for Christmas?  (With the potential of receiving coal, no less?)

While these ruminations are destined to give you a few minutes of deep thought, and likely enough midmorning diversion from what you should be doing, the answers are probably not be what you would expect. 

So when I heard how voting day came about I just knew it would give you a little to chew on in your mid-afternoon sugar coma.  Who the heck decided that a Tuesday in November would be an ideal day to fit your most sacred civic duty into your schedule?  The first Tuesday of November is not exactly the epitome of convenience.  Wouldn’t a Saturday be better?  Or a national holiday so it wouldn’t put a kink in a workday?  No one has Tuesday off!

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From our previous pick posted to the stocks on radar on October 26th (Nasdaq: PETS) is nearing in on 25% gains. Currently sitting at a 22% gain in less than five trading days there’s one quote that comes to mind. (more…)