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Technology Stocks : IDTI - an IC Play on Growth Markets -- Ignore unavailable to you. Want to Upgrade?

To: Hippieslayer who wrote (10382)	7/15/1999 11:25:00 AM
From: William F. Wager, Jr.	Respond to of 11555

IDT pulls plug on x86 chips By Om Malik NEW YORK. 05:30 PM EDT—Another one bites the dust! Weeks after National Semiconductor (nyse: NSM) decided to bow out of the x86 chip business, IDT Technology (nasdaq: IDTI), another also-ran in the PC microprocessor business, has decided to pull the plug on its x86 chip business. IDT, which is based in Santa Clara, Calif., has been unable to take more than one percent of the microprocessor market. The announcement confirms the news published on June 21 on Forbes.com. IDT, in a statement on July 14, announced that it will exit the x86 microprocessor market and sell off its WinChip microprocessor technology and certain assets of the company's Centaur Design subsidiary, based in Austin, Tex. The company says that various parties have expressed interest in the technology, and the final decision will be made by end of the calendar third quarter. IDT has fallen victim to Intel's (nasdaq: INTC) hard charging marketing machine that has aggressively cut prices to regain market share in the budget PC category. In May 1999, National Semiconductor decided that enough was enough and pulled the plug on its Cyrix microprocessor division. That little x86 adventure cost National $550 million. IDT Technology has been flirting with the x86 market with its WinChip processor for almost two years with little success. IDT introduced a new X86 Pentium class microprocessor in May 1997 designed by its subsidiary, Centaur, which is based in Austin. Using just ten engineers IDT spent just $15 million to develop the C6. But even the low development costs are not enough to save the chip. IDT, which has the smallest die-size for its chips and the lowest overhead in the business, still has not made a dent in the x86 market. Analysts say the WinChip does not have the power to compete even with the low-end Intel chips. In 1998, Intel sold about $5.2 billion dollars worth of processors, versus $7 million in total microprocessor sales by IDT. Given the starkness of these numbers, it is no surprise that IDT is exiting the x86 business. IDT has been selling the 233 MHz versions of its WinChip processors for roughly $30 a chip, versus Intel's $150 a chip average selling price. The sales of this processor have been falling in face of aggressive price competition from both Advanced Micro Devices (nyse: AMD) and Intel. "The Centaur design subsidiary has created quality products and significant intellectual property for IDT, yet the company's ability to drive increased revenue and profits by participating in this highly competitive marketplace has not met our expectations," said Len Perham, IDT chief executive in a statement. "Our decision to exit this marketplace underscores our focus on the communications market, where we can deliver the greatest value to customers and the most attractive returns to our shareholders," Perham added. In a related development, the company reported that its revenues for the fiscal first quarter ending June 30 were $153.9 million, essentially flat with the $153.0 million in the first fiscal quarter one year ago. Earnings came in at $8.5 million up from a $50.9 million loss in the first fiscal quarter last year. Earnings per share came in at 9 cents a share, soundly trouncing the 4 cents a share estimate forecasted by Wall Street analysts, according to First Call. "We had a very good quarter," said Perham, and added, "Revenues and bookings in our core business are the best we have seen in well over a year, and bookings of products acquired from Quality Semiconductor have exceeded expectations. We are excited about our position going into the second quarter and the prospects for continuing to steadily deliver improved returns to shareholders are very good." Given that the company is getting rid of loss leader WinChip perhaps IDT will turn out to be one of those companies which actually delivers on what it promises.