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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Mark Oliver who wrote (4488)	1/17/1998 10:28:00 PM
From: Ian@SI	Respond to of 10921

EXTRACT FROM SQUAWK BOX INTERVIEW WITH: ATMEL CFO KRIS CHELLAM JANUARY 8, 1998 Mark: The memory chip maker announced that it will be forced to take a $160 million write-off which will result in a fourth-quarter loss. Analysts were expecting the company to report a profit of 34 cents a share. The company attributes these problems to Asian customers who can't get financing to pay for orders already scheduled for shipment. Investors were shaken by the news. Shares lost 2 points yesterday to close at a new 12-month low of 17 3/8. Its high is 48 7/8. As you can see from that chart, the problem started well before Asia, although they do seem to have accelerated. Here to fill us in is Kris Chellam CFO of Atmel. He joins us live from Palo Alto, California. Good morning, sir. Thanks for being with us. Good morning. Mark: I wonder if you could tell us does this issue of your Asian customers and them being able to get credit letters of credit I would assume is what are you talking about ---does this carry forward now? Is it likely to persist? Well, some the things we are looking at is -- as we take new orders you know we are being a little bit more cautious as to the viability of some of these customers ability to pay. So, I think what we are trying to see is the business is shifting towards some of the larger multinationals. Mark: Does this put you in a -- how should i put this -- in a price squeeze situation? Are you having to lower your prices as well? Oh, absolutely. I think one of the things, I guess, picking up on what Larry said earlier on deflation, our business selling prices have probably gone down about 50% this year. And I think when people were looking into the second half of this year traditionally the Christmas season is a strong season, and people were gathering up for a strong rebound in the industry. And consequently, you know, expenses have been built up to support that. But has the Asian situation developed it through a level of uncertainty on the outlook and that is fundamentally what caused the inability for us to meet our revenue expectations. Mark: And the picture right now remains uncertain is that it? It is a little bit uncertain. But I think just following normal economic cycles, you know. the cost of doing business in Asia ---from an Asian point of view--- is becoming a lot cheaper. And so, ultimately, a lot of those economies will be looking for substantial export opportunities to try and recover. And given that, you know, we've got a lot of Asian focus and things like consumer products, we think eventually this thing will turn itself around and we will benefit from the cheap currency over there. Mark: Yet in the short term, at least, for 1998, you are lowering your capital expenditure plans significantly from 400 million to 250 million. That is correct. I think in this period of uncertainty we try to focus on the things that we have control over. And the company had budgeted for about a 30% capacity increase in 1998 because the industry was expected to grow about 20% next year. In light of the uncertainty, we felt is prudent to try and slow down the capital expansion plan and instead focus our investment on more advanced equipment, so that we can try an cost reduce our products and squeeze more out of what we have. Mark: Let me ask you this. Is your decision symptomatic perhaps of a problem for the semiconductor equipment makers? Well, I think one of the things that helped the equipment makers is that we are on this treadmill where I've got to move my equipment to the newer generation. So, any equipment maker who's got advanced equipment in the works is going to do quite well. Mark: Okay. And finally, within your business, how is the wireless telecom because you sell into the wireless telecom area. How is that doing? Because we have heard from others that there had been hiccups even slowdowns. Overall, I think the telecom business is doing quite well. Clearly, you know, in this, period as significant price erosion even in their businesses but the bottom line is the unit volumes are still growing. I guess as an example we are probably shipping about 60% more units at the end of this year than we were the end of last year and fortunately the selling prices have gone down more than half. Mark: How much of your business is Asian, by the way? Asia accounts for about 45% of my revenues. Mark: 45% Of revenues. Correct. Mark: Mr. Chellam, thanks a lot. Appreciate you sharing your time with us. Thank you. Kris Chellam, CFO of Atmel.