IDTI - an IC Play on Growth Markets Message Board

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Technology Stocks : IDTI - an IC Play on Growth Markets

IDTI 48.99

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Mar 29 5:00 PM EST

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To: Mike Taylor who wrote (3760)	9/25/1997 11:36:00 AM
From: Rob S.	of 11555

Obviously they see a big market for WebTV type devices - some predict sales of 10X that of PC sales within ten years. MS didn't want another OS to rise to prominence in that huge market. That would become a threat to future growth or even their base business as the lowest common denominator (features/cost) tends, over time, to prevail. It is still highly questionable how much IDT will benefit from this. IDT or any other chip vendor will be unlikely to be able to create a proprietary hold on this market as was the case with Intel and the IBM PC. The software environment has matured and transformed so that the OS's and programs used on embeded systems and NAs are transportable to various MPUs and architectures. IDT produces a commodity MIPs RISK part under license that will have to compete in price with similar MIPs and perhaps other architecture offerings from other manufacturers. That will keep the threat of losing the business a perpetual reality. Already IDT's CEO has said that IDT faces competition on the next generation WebTV device and he is not sure if they will be successful retaining the business. This should become a huge business opportunity for MS and WebTV. For IDT it will be a competitively fought commodity business with fairly narrow margins. Having MS at the ultimate helm is not entirely a blessing for a hardware mfg. MS is notorious for paying cheap for their hardware products and selling at a premium based on the pull of their name. This is not as much of a commodity product as standard SRAMs and may prove to be more easily held at decent margins. IDT had an opportunity(?) to sell SRAMs to Intel for use in the PII - they declined because they saw it as a commodity business with little chance of returning much profit. The same may become the case with internet appliance MPUs. ICs, including processors, that go into TVs, VCRs., camcorders, and other consumer elecronics products sell for a few dollars or a few cents each. It will probably be a few years before the volumes are such that the MPUs sell for just a few dollars each but the lowering of price can be expected. Perhaps IDT can maintian higher ASPs by incorporating more and more functions onto the chip but that remains to be seen. Near-term, if the product is more successful this year than last and they sell close to the 1 mil target, IDT will have a substantial increase in overal sales and earnings. And if this product area grows as many expect it will, then IDT should be able to grow with the market by selling parts to others for many different internet appliance applications.

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