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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: kane who wrote (10100)2/15/1999 11:51:00 PM
From: Xianming Liu  Read Replies (1) of 11555
 
Kane:

I am really impressed by your trust that IDTI will make significant amount of money from Winchip line. However, the chance that IDTI will make any significant amount of money in Winchip in next 1-2 years is very small. First, according IDTI's currently plan, the 400-600 Mhz Winchip will not be out until the second half of 2000. By the time IDT comes out with chip (assuming IDTI does it successfully), the 400 Mhz chip will be really low-end CPU. Currently, the retail price for 400 Mhz, 333 Mhz, and 300A Mhz Celeron are about $142, $70, and $57 each (You can check the CPU price at pricewatch.com). In next 5-6 quarters, the 400 Mhz Celeron will probably drop below $50. I know AMD has to sell its own CPUs at 25% discount to the comparable Intel CPUs. IDTI will be very lucky if it can sell the 400 Mhz at $40 each in the second half of 2000. Unless IDT gets serval large OEM's (which is difficult with the low-end CPUs), I do not see any significant profit on Winchip after the equipment and labor costs. IDT's last 10-Q indicates that it still has more capacities than it can currently use even after the big write-off in the last 3 Q's. If IDT executes successfully and sells sufficient numbers of 400-600 Mhz, it may help to utilize the capacities. Otherwise, the Winchip maybe another project that turns into a money sucker.
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