Rob:
Thanks for posting the info on your conversation with the investor relation personnel of IDTI. During your conversation, did you ask IDTI investor relation personnel if there was any recent insider buying. If I remember correctly, a lot of insider buyings in last year were made at averaged price of $10.25. Considering that the current price is about 30% lower than the price they paid, a lack of insider buying could indicate either lack of near-term visibility (i.e. stock could get cheaper in near term) or insiders have already put too much of their stakes in IDTI. Of course, the lack of significant insider sales could also be a bullish sign.
One of the danger in the low-end X86 CPU business is the rapid change of the market makes your products become out-dated. A while ago, a lot of people were stating in this site that IDTI would not suffer much by the decline of the CPU price since it is the lowest cost producer. Well, equipment cost to make the Winchips is not small. If IDTI can not have right product for the low-end market at right time, it probably can not even recover the cost. An extreme example would be a company figure out a way to make 100 Mhz 486 CPU at $8 each (a really impressive task). However, I am fairly sure this company would lose money because a lot of people simply will not buy it even at $5 each today.
Even if IDTI comes out its Winchip II according to its current schedule, it is debatable whether if has already missed the window of opportunity. INTC has just cut its 266 MHz and 300 MHz Celeron to $106 and $159 each respectively. According to its plan, IDTI's 300 MHz Winchip II will not be out until the late December. At that time, it seems reasonable to assume that the 333 MHz Celeron chip will drop around $100. If projection is the correct, it seems that IDTI would really lucky if it can sell 300 MHz Winchip at $70 each at the end of the year. If one considers the fact that majority of the Winchip II at the end of December may still be likely 266 MHz, the average price that IDTI can get probably will be around $60 or below. If IDTI can not produce or sell enough Winchips, the Winchip business may not be able to break-even by the end of the year (I think the indication from IDTI's management in April was that Winchip business stood alone would not be break-even until after the Sept Q). A real problem is that IDTI could not roll out Winchip II on schedule. Given that the C6 roll out have not been perfect and that the moral of IDTI's employees are probably not very high (yes, the sharply plunge of the stock price not only depresses us, but them too), one can not take IDTI's execution of Winchip II for granted. A delay of 1-2 months in the roll out of Winchip II would lead to a replay of C6 Winchip disaster. |
