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To: Ausdauer who wrote (13206)	7/21/2000 9:56:48 AM
From: Jason W	Read Replies (3) \| Respond to of 60323

BUSINESS WEEK ONLINE July 21, 2000 Intel's Giant Steps into Flash Memory The king of microprocessors is stealthily becoming the world's biggest maker of this fast-growing technology Consumers never see Intel's primary product and probably couldn't explain how it works. Yet the company's brand name is universally recognized as the leading supplier of computer microprocessors. Thanks to a multimillion-dollar advertising campaign and an 80% market share, everyone knows that Intel makes the central processing unit (CPU) for most of the world's personal computers. Few people realize that Intel wasn't always in the CPU business. In the early 1980s, the Santa Clara (Calif.) behemoth was king of the memory-chip market, with CPUs being a nicely profitable side business. As memory chips became a commodity in which one's company product was indistinguishable from another's, Intel engineered a drastic reinvention of itself, casting itself in the role of CPU manufacturer. Andy Grove, who at the time was CEO, said later that it was a "difficult decision, but it was made much easier because we were staring at our own gallows." GOOD CHOICE. A glimpse at Intel's second-quarter earnings report shows that once again the company is in the midst of reinventing itself, this time in a stealthier fashion. The new holy grail for the company is the business of selling flash-memory chips -- used in battery-operated devices that hold their memory even when the device's power is off. Intel is quickly rebuilding itself into the world's largest manufacturer of flash chips. And if you had to pick a business to be in at the beginning of this new millennium, this one wouldn't be too bad a choice. Although overall flash sales two years ago were in single-digit billions of dollars, Semico Research in Phoenix estimates that growth will average 18% a year for the next five years. Semico also says by 2005 many Web-enabled mobile phone sales will be double those for PCs. The primary cost of each of those cell phones will be the flash-memory chips, which store operating information. You won't hear anyone at Intel openly admitting that it's becoming a flash-memory company. That's because the PC chip business still makes the lion's share of the company's revenue -- some 87% in 1999. But flash products accounted for much of Intel's revenue and income growth in the second quarter and almost all capital-spending projects are going toward flash production. "After you take out interest income, it looks like [flash chips] account for all sequential growth," says CS First Boston analyst Charlie Glavin. PHENOMENAL GROWTH. For the second quarter, Intel had sales of $8.3 billion, only 4% higher than for the first quarter. The company admits that the prices of its family of computer microprocessors remained flat while giving few specifics on CPU sales. But Intel also said its sales of flash products broke a record. Although the chipmaker hasn't yet released a revenue and income breakdown for its units, analysts are piecing together a picture of phenomenal flash growth, while CPU revenue growth rates were flat. "The biggest question is whether they are keeping up with demand for flash products," says ABN Amro analyst David Wu, who has a buy rating on the stock. "And it appears that they are over the hump in terms of their manufacturing problems and are meeting demands for their chips now." Intel Chief Financial Officer Andy Bryant says meeting that demand has been humbling. "We've had trouble getting all the equipment we need to increase production," Bryant said during a conference call on Tuesday, July 18. "We're still not satisfied with the amount of inventory we have, but we're doing a better job this quarter than last." "GETTING BETTER." Nevertheless, the company's flash sales have once again set a record. "Flash has definitely been one of the all-time success stories of this company," says Senior Vice-President Paul Ottelini. "Quarter after quarter, it just keeps getting better." Indeed, the most recent quarter has been another good one for Intel. Thanks to a $2.3 billion windfall from the sale of stocks that it owned in other companies, primarily Micron Technology (MU), the company could boast of $3.1 billion in earnings for the second quarter, or 45 cents a share even. Analysts expect Intel to make $1.68 per share for the year 2000 and $1.80 in 2001. A close observer of Intel shouldn't be too surprised that flash-memory chips have become a major moneymaker for the company. Most of its acquisitions over the past few years have had nothing to do with PCs. Most notably, in 1999 Intel acquired networking-chip designer Level One Communications for $3 billion and wireless-chip designer DSP Communications for $1.6 billion. The acquisition spree goes on. Last month, Intel announced that it had purchased Visteon Corp.'s Ford Microelectronics Div. That division consisted solely of 75 engineers, all of whom are familiar with wireless chipset design. Intel plans to use those engineers, based in Colorado Springs, Colo., to increase the speed at which mobile-phone chip designs are completed. BILLIONS AND BILLIONS. The company also signed a landmark pact in June with Japan's Mitsubishi to jointly design and manufacture flash-memory modules for the next generation of cell phones, called 3G. That puts Intel well into the lead for the dominance of that market also. Finally, chipmaker has announced two major factory constructions this year. In Albuquerque, N.M., it's spending almost $2 billion to expand an existing plant's space to produce more flash chips. And Intel is dropping another $2 billion on a new factory in Ireland that will also make flash chips. Both plants will specialize in making flash chips that have a channel width of 0.13 microns, which will allow for the densest chips ever produced. Clearly, the PC revolution that made Intel what it is today had to slow down at some point. Now in the race to become the Intel of flash chips, Intel is in the lead. 7/20/00 10:44 PM

To: Ausdauer who wrote (13206)	7/21/2000 1:33:20 PM
From: Art Bechhoefer	Read Replies (1) \| Respond to of 60323

The remarks of Bin Yeh confirm the indications I received recently from a retired Kodak executive, who said Kodak saw a market for digital cameras with wireless Internet access. That arrangement would be ideal for embedded memory if it were possible to transmit the images by wireless to a host computer (or by wired or wireless connection to one's own computer). Maybe this is why Kodak has shown little apparent interest in investing in flash memory, and specifically in compact flash, even though it equips all its digital cameras with compact flash.

To: Ausdauer who wrote (13206)	7/29/2000 1:08:23 AM
From: thecalculator	Read Replies (1) \| Respond to of 60323

Consumers want personal data on visible removable media with a tactile confirmation of security,... What consumers would you be referring to? Most of my data is stored on a 'non-removable' hard-drive, and whether or not I can hold it in my hand does not attest to the security of its contents. In fact, I contend that it will be much easier to lose the data if it resides on a postage-stamp sized card (e.g., have you ever misplaced a floppy?). ...not in some "black box" embedded chip with a tempermental wireless connection. I wish to make it clear that I have not suggested any such scenario. For example, you can see from this post, messages.yahoo.com that I refer to devices with an I/O port built into them....there is nothing "temperamental" about it. Nonetheless, improved high bandwidth wireless in the future will likely be an alternative and popular means of moving data back and forth between the portable appliance and a network based hard-drive. (I found out today that NSM is planning to put the new Metricom Ricochet2 modem functions [128 kps] onto an embeddable chip.) Embedded applications will increase OEM costs and decrease consumer purchasing power and interest. This is not at all necessarily true, and certainly, the type of consumer device will likely determine whether or not the cost & space requirements of a flashcard slot and the attendant external flashcard packaging are warranted. For example, as more and more functions are crammed into a form-factor such as shown here etown.com, it may very well make sense to do away with the flashcard slot altogether. And it is just not cost & space advantages where embedded memory may have the edge, but it might also be in performance, whereby logic embedded with the memory (rather than relying upon removable memory) might have significant speed advantages. thecalculator