Snipped from thestreetdotcom:
thestreet.com
Montgomery Tech Conference:
National Semi CEO Gives LAN Program Intensive Care
By Marcy Burstiner
Staff Reporter
2/3/99 7:00 PM ET
SAN FRANCISCO -- National
Semiconductor's (NSM:NYSE)
"LAN Get Well" plan, named
"Corporate Priority #1" at its annual
shareholder meeting in September,
is in critical condition.
Two weeks ago, CEO Brian Halla quietly took the Local
Area Network division under his personal charge and
announced internally the retirement of Robert Penn, the
head of the telecom division that was previously home to
National's LAN business. This came just two weeks after
the division pulled back samples of its latest Ethernet chip
because of a lukewarm response from potential
customers.
You can't find these news tidbits in a Jan. 20 press release
that announced Jean-Louis Bories was named the new
head of National's Cyrix division as well as other executive
shufflings. And don't expect to hear much about LAN at
the company's financial presentation at the Nationsbanc
Montgomery Tech Week conference Thursday.
Investors "don't care to hear any more about it until we do
something," says an investor relations spokesman who
asked not to be named. Instead, he says, you'll hear Pat
Brockett, executive vice president in charge of the analog
division, talk about wireless products. (At the September
annual shareholder meeting CEO Brian Hall named analog
"Corporate Priority #4").
When TSC asked, the spokesman did acknowledge that
potential telecom equipment customers showed a "lack of
enthusiasm" for the company's Quad PHYter -- a four-port
transceiver for local area networks, deemed crucial to the
LAN division's recovery.
The company had met its own deadline for sampling the
Quad PHYter. But potential telecom equipment customers
have been buying similar products from Broadcom
(BRCM:Nasdaq) and Level One Communications
(LEVL:Nasdaq) for six months, which puts National's
product pretty far back on the curve. Even SEEQ
Technology (SEEQ:Nasdaq), a company with a history
for being late to market, began shipping quad PHYters last
year.
To sell customers on National's Quad PHYter, the product
would have to have features the others don't, the
spokesman says. "We are now reviewing the Quad PHYter
for launch with adjustments," he says.
It was for the Quad PHYter that National spent $122
million last April to buy ComCore Semiconductor. "They
paid through the nose for it," says Cowen & Co. chip
analyst Drew Peck, who has a neutral rating on the stock.
(Cowen is not an underwriter for NSM.)
National can tinker with its Quad PHYter all it wants, but
the company has missed its chance, analysts say. "The
quad design-win cycle has already peaked," says
Dataquest telecom analyst Jeremy Donovan. "The Octel
[the next generation, 8-port transceiver] design win cycle is
likely to peak in Q3 to Q4 of this year." Moving from a
two-port chip to a quad, and again to an Octel reduces
manufacturing costs.
National isn't ready for the Octel, even though SEEQ
announced an Octel product in November. When
Broadcom followed with its own Octel announcement Jan.
5, its stock shot up 41% over the next three days. Asked
about plans for an Octel, National's spokesman says,
"Let's see how successful we launch a quad."
"We haven't seen much competition from
National in a long time," says Phil Salisbury,
CEO of SEEQ Technology. "At this point they
will have a lot of trouble breaking into the
market."
The longer National takes to penetrate the PHY market,
the harder the task will get, says Phil Salisbury, CEO of
SEEQ, who knows how tough it is to come from behind.
"We haven't seen much competition from National in a long
time," he says. "They don't have a part now that
compares. At this point they will have a lot of trouble
breaking into the market. Within the next three to six
months the Octel design wins will get solidified."...
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