Mason, you posted, "We should have foreseen Intel's response. . ."
Many people, including myself, were not at all surprised by Intel's recent actions. These were in line with historical norms and were expected under the circumstances. I don't agree that the margins for IDT's C6 will be "shaved too thin". To the contrary, INtel's historical ability to charge 60%+ margins on tens of billions of dollars of MPU sales is an unprecedented exception in the electronics industry. No other IC company on the face of the planet has ever enjoyed this level of margins on anywhere near this level of business. That is what makes the MPU market so attractive for competitors to risk tens to several hundreds of millions to pursue. The difficulty has been until about two years ago, largely that of trying to catch up with Intel's design lead. Due to evolution and maturation of the industry including design and verification tools, Cyrix, AMD and now IDT have done that. So what if IDT's margins are 1/2 of those of Intel? Does that change the basic equation that; 1] The market is huge and is splintering into diverse sets of requirements, not all of which are being successfully dominated by Intel. 2] IDT need only achieve 1/4-1/2 the margins of Intel to achieve very healthy margins on high ASP parts. 3] The impact of capturing a paltry 3%-6% of the MPU market will potentially double or quadrupple IDT's business.
As I said shortly after the earnings release and conference call, IDT is a short term hold to accumulate and a mid-long term buy with huge potential. I don't think this is a good time to sell because the impact of this scenario is yet to be factored into the stock price. News and reviews may come out of Comdex, even if overshadowed by product news from Intel and others, that can lead to some greater confidence that the C6 will achieve "significant" sales in the near future. IMO, resonable projections for C6 sales and production ramps along with the many other new product introductions and stable or slightly positive pricing on SRAM and other products will have more impact on IDT than most other semi stocks which are already "proven". Granted, there is a risk that IDT & it's subsidiaries and partners fail to meet their objectives. However, I think the potential rewards exceed the risks. |
