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Technology Stocks : CRUS: Can they restore investors' confidence?
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To: jason who wrote (8)1/27/1997 11:34:00 AM
From: Robert Talty   of 23
 
Jason, I think CRUS R&D is wasteful, dont get me wrong. However, I don't think the problem rests with the design engineers. On two of the major product strategies that they have tried to follow in the last 2 years they spent lots of money only to get their butts kicked in the market. SSI and AT&T took the PRML read channel market, this was mainly a process, or lack thereof, issue. (CRUS was trying to make standard CMOS compete with a dedicated process) They tried to address the problem of gaining access to dedicated processes by forming these manufacturing agreements. Unfortunately their timig stunk there because they did not foresee the slump that started in Dec 95. Before Dec 95 capacity was a major problem in the industry. After Dec 95 capacity was no problem at all. Most Fabs were lucky to be running at 75%. So as a result wafer prices fell. Spot prices on 6 inch 0.6u DLM fell in 96 to 1/2 95 prices. The problem was that CRUS was locked into these buy or pay anyway agreements. So the fall in spot prices did not benefit them, in fact it only meant that margins came under a lot of pressure because manufacturing costs were reduced for most of the competition.

Sounds like a comedy of errors, but I think this period is behind them. The industry is booming again so I expect CRUS to come out of this given a little time.

regards
Robert Talty
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