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Technology Stocks : INTS - Integrated Systems -- Ignore unavailable to you. Want to Upgrade?

To: Alan A. Hicks who wrote (312)	9/19/1999 9:13:00 AM
From: John B. Dillon	Read Replies (3) \| Respond to of 327

Alan, Alan, INTS had a very good quarter while making significant strategic investments that can be expected to lead to accelerated long-term growth. I was very impressed by the conference call and Chucks ability to handle all of the questions. He is very articulate and thorough. Here is a brief summary of the pertinent issues. 21% increase in seats and 24% new design wins for PRISM. 85% product gross margin, which they feel comfortable with going forward. $19,000,000 deferred revenue. New wins included: Toshiba, digital TV; Polarid and Fugi Film, camera; NEC and Samsung, cell phones; LG Electronics, Set top box and multimedia; Hyundi, telecom, India Lucent. Four new wins in Silicon Valley not announced. Erickson, Hitachi and Nortel were also mentioned. In Taiwan Dr. Design is designing a set top box. The customer is unannounced. We can expect six ports of Java to different platforms. The first ports will be to MIPS, X86 and PC and are expected to be complete this year. The next three ports will be finished in March 2000. Quarterly service revenue was low, because INTS invested in the future by taking revenue-producing engineers off of Dr. Design for Java ports. Without this investment, service revenue would have increased $3,000,000. After the ports are complete, these engineers will be available to produce revenue (at higher rates) for Dr. Design. INTS differentiates itself from WIND by having a rock solid OS, smaller footprint, and one-stop shop with complete tools and tightly couples compilers. ARM, MIPS and X86 is growing and this could lead to additional business for INTS. I found Chucks comment regarding the possibility of an upside in revenue very interesting especially since the linearity of the quarters will continue to be back end loaded. He did say that with addition of SDS the linearity could get better. Sales and R&D expenses will continue to be high for the next couple of quarters and then it will drop down. Thanks for your questions regarding expenses. The Vantage Strategy appears to be very successful. They are receiving a couple of calls a day from companies wanting to partner with INTS because of this program. The goal is to get the customer to market faster, by providing a free license of a highly tuned sample device, which the customer can use as the basis of his design. Although the sample device is free, the customer still needs to purchase a processor and PSOS. This program will definitely lead to additional PSOS, and tool sales. INTS has 4 partners not announced and will announce other partners soon. Telecom and data comm represent 43% of their sales and the consumer market where they are very strong is 15% and growing. Late Q4 SUN will start selling Dr. Design. Looking at markets, sales to the Internet appliance market is on top of existing markets. This is significant! In summary, I think you are right that INTS is at least a $30 stock and could be much higher if their Internet appliance market is successful. jd