A nice little analysis of our benefactor, INTC.
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09:19am EDT 8-Jul-99 Fahnestock & Company (Dan K. Scovel 212-668-2804) INTC
FAHNESTOCK DAILY SEMICONDUCTOR COMMENTS
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Analyst Semiconductor Associate
Dan K. Scovel Morning Research Comments Michael McAllister
212-668-2804 7/8/99 212-668-8228
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SOX: 491.40 -0.9%, Gains: 3/7 Majors and 36% total
Industry Items: Industry Statistics: We believe the strength in DRAM products
posted in May industry statistics released earlier this week resulted from
timing of market price erosion and certain idiosyncrasies associated with the
logistics of collecting the data. We expect DRAM products to significantly
adversely impact June industry statistics scheduled for release in early-August.
DRAMs account for 10% of chip industry revenues and market prices have fallen
by more than 50% since May.
INTC: Via to Use National as Foundry: National Semiconductor will act as a
manufacturing foundry for Via Technologies core logic chip sets, including the
PC133 variety that Intel has not blessed and recently withdrew its license from
Via for. National has a fairly extensive patent cross-license with Intel, and
we believe this deal may satisfy Via's legal requirement for technology access
to offer its chip sets. Also, we know National and Via are ironing out details
associated with National's sale of Cyrix to Via. While we believe this foundry
deal it is not likely to offer Via a manufacturing cost advantage, the net
result to Via may be less worse than the royalty payments it was sending to
Intel that were rumored to be in the 20% to 25% range. In addition, we consider
it very much in National's--and Cyrix's--interests to find a legal way for Via
to market Cyrix microprocessors. We are now considering Via with its core logic
chip sets and potential low-end microprocessor offerings to be a significantly
more viable threat to Intel.
AMD is getting blown-away by Intel at the low-end of the microprocessor very
recently. We believe the K6 may be effectively neutralized from potential
profitability, and subsequently, as a threat to Intel. However, AMD is moving
up market with the K7 that will strike at the sweet spot of profitability for
Intel. Now we have a potential fresh and aggressive new competitor for Intel at
the low-end of the market with Via.
With regards to chip sets, we believe Intel is clearly hell-bent on
supporting Rambus and squashing any potentially viable competition--in spite of
what seems to be fairly clear cost disadvantages associated with Rambus DRAMs.
Intel gave over $1 billion to Micron and Samsung to ensure Rambus DRAM
availability, has apparently suppressed information flow throughout the industry
about Rambus costs and competitive alternatives through legal non-disclosure
gag-order constraints, has not supported a 133MHz SDRAM option in its core logic
chip set offering, and appears to have slung the full force of its market
weight and legal capacities to squash Via's PC-133 chip set offering.
We are not sure what is so sacrosanct about Rambus. Why doesn't Intel
support--or at least allow--PC-133? The company seems to be willing to risk its
market dominance on a potentially cost-inferior platform architecture when the
market is valuing cost-effectiveness above all else. If any company can change
a tide, Intel can. But why fight this one?
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information presented has been obtained from sources considered to be reliable,
but it is not purported to be complete or without error. Fahnestock & Co. Inc.,
and/or its officers and directors, and/or members of their families, may at
times have positions in any securities mentioned. Fahnestock & Co., Inc., may
make a market in securities mentioned and, accordingly, will have a position
that may change from time to time.
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END OF NOTE
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