My read on the conference call was positive relative to past performance and future prospects but luke warm on the sales and earnings prospects short-term. The basic scenario remains the same - IDTI is equipped at the Oregon fab to only 32% of capacity and running at less than that and while new product thrusts are gaining momentum, they have not ramped sufficiently to utilize the spent costs in facilities or R&D expenditures of the past several months. In comparison to INTC and many other semi companies prospects right now, IDTI appears modestly on the uptrend. The success of the C6 and C6+ and other new products will spell the difference between OK and perhaps sterling performance in the quarters ahead. In the immediate quarter, IDTI will experience some rampup costs associated with the C6 that will offset any business gains. Good, I hope they have LOTS of ramp-up costs - that will mean that production is ramping and is selling to customers. It's time to crank product through those pretty fab lines.
C6
Perham said that he is very proud of the Glen Henry and the team of engineers he has put together; pointing out the design and production milestones they have achieved in record time compared to any competitor. Perham thinks that Centaur/IDT has the quickest turns on creating new generations of MPUs of anybody. The C6 achieved 1st product shipments to customers in September but only in the hundreds of units for design and verifications purposes. The C6 is shipping, as we already know, in 180 and 200 MHz grades. they have already characterized 225 and 240 MHz. Perham said that they expect "the vast majority" of the current product will yield at over 200 MHz and they will start sampling 225 & 240 MHz to customers by early November.
Much of the sales are expectd to occur through established IDT distributors. IDT has taken one customer direct at this point. Perham would not say who this customer was or when an announcement would be made. The implications were that the volumes would be such that it would be more appropriate to deal directly with the OEM rather than have it handled by disty.
C6+
The C6+ is expected to tape out by the end of this month or the beggining of November. The C6+ is expected to come to market at or ahead of the schedule of IDT's competitors! Mainstream applications and graphics/multimedia perfromance of the unit is expected to be equal to "slightyly exceed" parts from competitors - AMD, Cyrix & Intel.
The initial version of the C6+ will be 88 mm2 in 4 metal (? or 5 per press release?) 0.35 micron design. this compares to Intel's competitive Pentium parts at 128 mm2 and 140 mm2 and Cyrix's M2 at 190 mm2. Cyrix is working on a new MPU that will be done in 0.25 micron 5 metal layer. The MPU core is said to be 66mm2 but no figure has been given out about the total chip. IDT/Centaur is working on the first shrink to 0.25 micron already which they expect to reduce the size by 30%. This will yield roughly a 62 mm2 die size!
Perham stressed that the C6 family is designed to have small die size and low power consumption. The initial C6 uses a single 3.3v power supply and consumes only 8.5-9 watts. It will "shortly" be available in a 2.9V version that will consume about 6 watts. The C6+ is expected to consume less than 6 watts.
MPU On-chip Memory
The C6+ will have 5.4 million transistor equivalents of which 4 million are in SRAM. The C6/Centaur design philisophy is to use a streamlined logic design and large system caches. IDT said that this is where IDT has an advantage because of the vast experience in SRAM and other memory technology. Perham said that IDT is able to implement large cache memories in a smaller geometry. The next version of the C6+ will move the secondary cache entirely onto the MPU. This is expected to allow the Super Socket 7 MB to be ramped up to 300 MHz!!! This obliterates the need for an expensive, industry upsetting, slot 1 type approach as taken by Intel.
Patent Trouble?
IDT has not been approached by Intel regarding a potential patent infringement lawsuit. Perham stated that no engineer involved in the design of the C6 or C6+ worked a single day at Intel. He also stated that IDT has a broad library of patents and excellent relationships with industry leaders. Glen Henry, an IBM Fellow, is one of the pioneers of RISK processor designs. I think a lawsuit could well be viewed as predatory and anti-competitive monopolistic activity on the part of Intel. It could happen, but it would be in extreme "bad form" given the credentials and patent portfolio IDT brings to the table. I don't think that this would be devastating to IDT but would, obviously, be at a cost of management time and energy and a few millions in paying for another marble pillar in America's criminally inefficient legal beuraucracy.
Intellectual Property Position
IDT is considered to be in the best position in respect to intellectual property and products that bring "tremendous value" to their customers. This position should start paying off. Perham pointed out that there is a large amount of excess capacity in commodity ICs. When a recent Taiwan semiconductor plant burned down, resulting in the loss of something like 60,000 wafer starts per month, the loss of production had zero efect on RAM or other prices. that is a sign of over-abundant supply. IDT is now in a much better position than many of its competitors because it has products that have high intelectual property content and bring enabling value to the customers applications.
Clear Logic
Clear Logic is expected to have a zero NRE and one week trun around on designs with a low minimum order requirement (Rumble, rumble, something is shaking here). In January they are expected to announce the first family of standard FPGAs that they will be able to convert. The Clear Logic product will greatly reduce the power consumption and increase performance (if usable or desired) of customers designs. It does this by greatly reducing the die size compared to programmable logic technology. This sounds potentially like a new world class killer product category but too few detail are availble to draw too many conclusions. This product has the potential to ramp to tens or hundreds of millions quickly. I believe a number was given during the conference call to pursue questions on Clear Logic.
Summary:
Generally IDT's results are on target for this quarter and they are on target with their broader business plan. The delivery on the plan is still not spectacular. The company appears to have directed their eforts toward several profitable emerging product market segments that have a greater posibility than ever of shaping up into meaningful and posibly spectacular results in future quarters. These results will still take time to build.
My 12 month target for the stock price remains almost twice where it is today $24-$26. The short term prospects for moving over the 15 mark are a bit less certain because no concrete statements were made about C6 sales or who the large OEM is. Looking at the 6-12 month horizon, IDT is a buy, particularly if we get a significant pull-back for any reason, including threats of an Intel lawsuit, during the next quarter. |
