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Technology Stocks : IDTI - an IC Play on Growth Markets
IDTI 48.990.0%Mar 29 5:00 PM EST
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To: Medisco who wrote (7946)4/22/1998 6:46:00 PM
From: Rob S.  Read Replies (2) of 11555
 
Len sounded very confident in the overall strategy behind the WinChip; make it highly compatible and highly manufacturable. Then who cares what the helx Intel does unless they try to sell parts bellow their actual cost of production. IDTI, once they ramp to 1 mil per qtr run rate, should be able to make 50% margins while Intel, AMD and Cyrix are at -x% to +30% margins. I think that would be a place that none of these companies would want to take it - just not good business. Intel could try to beat back competition by lowering the price to the point that they force everyone to lose money but that would be so openly monopolistic that it is hardly possible. The feds are showing a fair amount of nerve in going up against MS and Intel trade practices. It could happen but no-one expects it.

The question remains of where they will sell 1 million+ parts per qtr. at the end of this year. That remains a tough question but if you look at the characteristics of the various competitors parts, the WinChip II should find many sockets to fit into. It will be highly competitive for mobile computers and sub $900 PCs. The lower power budget and low cost of mfg. should make it able to do better than survive in a highly competitive market.

Saying that, I want to warn again that a pull-back in the general market or a summer high-tech slow down could take a hit against IDTI's stock price. This news wasn't all that discouraging but the market may well interpret it irrationally. I wouldn't be surprised to see IDTI stock move down sharply but I also wouldn't be very surprised to see it move even higher if investors focus over the longer horizon. My feel is that we are heading down.
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