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

To: Vijay Raghavan who wrote (4541)	11/1/1997 10:31:00 AM
From: Marc Phelan	Read Replies (3) \| Respond to of 11555

Vijay, Excellent article in Barrons by Eric J. Savitz in PLUGGED IN column. The pertinent portion to this thread is as follows: Integrated Device Technology. Murphy thinks Integrated Device could be a prime beneficiary of the rise of PCs selling for less than $1,000. Overall, Integrated hasn't been making much money lately -- it's been hurt by sliding prices for SRAMs and for logic chips, its core products. But Murphy believes IDT could do considerably better in the microprocessor business. Integrated's Centaur Technology subsidiary has begun rolling out a new Intel-compatible processor called WinChip. Glenn Henry, the Dell and IBM veteran who heads Centaur, says the company will ship at least one million WinChips next year, and possibly as many as two million, with each priced a little under $100. The challenge for Centaur will be to get big, established companies to use WinChips. Henry says he'll unveil a list of PC vendors who plan to use WinChip sometime before Comdex, which takes place in Las Vegas later this month. But he warns that the roster will be made up of "third tier" resellers that most people won't recognize. As production volumes rise, Centaur intends to press hard to sell its wares to a better class of PC maker. And the chips do have some alluring features -- the Centaur part is smaller than its rivals from Intel and AMD, which makes it cheaper to produce. The first generation WinChip runs at 200 MHz, but it lagged rival parts in multimedia tasks, Henry admits. The next generation of his chip, though, should be faster, running at speeds up to 300 MHz, and it should include improved graphics functions. If Henry's forecast on sales for next year is accurate, Centaur could nicely shore up IDT's bottom line. Assume Centaur can sell a million WinChips at $90 each -- that's $90 million in sales. In IDT's March 1997 fiscal year, the company had revenues of $537 million and earned an operating profit of a few million dollars. In the first six months of the current fiscal year, the company earned $4.5 million, or a nickel a share. Compared to the commodity parts that make up most of IDT's business, the new microprocessors should have higher profit margins -- let's say 50%. If that $90 million in sales materializes, could it make a difference? You betcha. Marc