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

To: Marvin M. Lim who wrote (6113)	1/27/1998 1:55:00 PM
From: flickerful	Respond to of 11555

January 26, 1998, Issue: 773 Section: CRN Mutual Fund ------------------------------------------------------------------------ Michael Murphy; Editor, California Technology Stock Letter For his three-month picks, Murphy likes Diamond Multimedia Systems Inc. in part because he believes there will be a strong comeback for the graphics boards market. He said he chose Integrated Device Technology because the "new C6 Intel [Corp.] compatible microprocessor has five to 10 customers already, [and] will sell 1 million to 2 million chips at $80 to $100 in 1998." For his six-month picks, Murphy said Ross Systems Inc. is "gaining share rapidly." For the full year, Murphy said:"Informix [Corp.] has the best database technology, and with financial restatement done and new management, [stock] will gain on Oracle all year long." And he said Asian production lowers the costs for LSI Logic Corp. "Also, unlike most U.S. companies, [LSI] has good exposure in consumer products like DVD and digital cameras," he said. --- $114,276 3-Month Picks: Buy.......:Diamond Multimedia Buy.......:Integrated Device Tech. 6-Month Picks: Buy.......:Applied Materials Buy.......:Ross Systems 1-Year Picks: Buy.......:Informix Buy.......:LSI Logic Copyright (c) 1998 CMP Media Inc. New Search \| Search the Web You can reach this article directly here: techweb.com <Picture: CMPnet><Picture>C M P n e t ÿ S U P P L E M E N T S <Picture>Serve up targeted ads with Web-server solutions. <Picture><Picture>New Internet services help run your small biz. <Picture: Today's Features><Picture>Force Windows 95 to use your modem's fastest port speed. <Picture>Top corporate Websites + company info = Business Guides <Picture>NetBusiness is giving away $1,000. Enter the contest today. <Picture> <Picture: Infoseek. Once you know, you know. Click here.>

To: Marvin M. Lim who wrote (6113)	1/30/1998 4:56:00 PM
From: Marvin M. Lim	Read Replies (1) \| Respond to of 11555

Headline: Integrated Dev. Tech: Diversification News Mixed lehman.com Author: M. A. Gumport, CFA 1(212)526-5368/T. Berg -5276 Rating: 2 Company: IDTI,ALTR,AMD,INTC,MU,NSM Country: COM CUS Industry: SEMICO Ticker : IDTI Rank: 2-Outpeform Price : $13 1/4 52wk Range: $15 1/2 -9 Price Target: $16 Today's Date : 01/29/98 @ 11:25 AM Fiscal Year : MAR ------------------------------------------------------------------------------ EPS 1997 1998 1999 2000 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.11A 0.02A 0.02A 0.06E 0.06E 0.25E 0.25E 2nd: -0.13A@ 0.03A@ 0.03A@ 0.09E 0.09E 0.30E 0.30E 3rd: -0.55A@ 0.03A 0.03A 0.15E 0.15E 0.30E 0.30E 4th: 0.03A@ 0.03E 0.03E 0.20E 0.20E 0.35E 0.35E ------------------------------------------------------------------------------ Year:$ -0.54A@ $ 0.11E@ $ 0.11E $ 0.50E $ 0.50E $ 1.20E $ 1.20E Street Est.: $ 0.10E $ 0.11E $ 0.72E $ 0.62E $ -.-- $ -.-- @-Includes: FY2Q97 $-0.08 inventory write down, FY3Q97 $-0.48 restructuring, FY4Q97 $+0.01 nonrecurring, FY2Q98 $0.01 after tax net of bad debt reversal, foreign exchange loss and charges related to marketing of C6 mpu. ------------------------------------------------------------------------------ Revenue (1997) : $537.2 Mil. Proj. 5yr EPS Grth : 6.0 % Return On Equity : -5.9 % Dividend Yield : 0.0% Shares Outstanding* : 89.5 Mil. Book/Price to Book: $8.06; 1.64x Mkt Capitalization : 1185.9 Mil. P/E FY98; FY99 : 120.5x; 26.5x Net Cash per Share* : $2.22 Convertible : Yes Disclosure(s) : G,C, A Includes convertible as equity ------------------------------------------------------------------------------ * MIXED NEWS ON IDTI'S DIVERSIFICATION PROGRAM; CLEAR LOGIC ANNOUNCEMENT LAST WEEK A DISAPPOINTMENT BUT RECEIVING 1ST REPORTS OF A FAVORABLE RECEPTION FOR IDTI'S X86; EPS PROJECTIONS UNCHANGED; ON BALANCE, STILL BELIEVE IDTI IS A BETTER PLAY THAN COMMODITY MEMORY PRODUCERS; $16 1 YEAR TARGET MAINTAINED. ***************************************************************************** STOCK VIEWPOINT: MIXED NEWS NEAR TERM BUT STILL OUR TOP FORMER MEMORY STOCK: Diversification is IDTI's key strategic focus. For the moment, diversification is a drag on EPS (start up operations probably cost $0.06 in EPS for Dec. FY3Q98), but diversification should allow IDTI to grow in excess of 20% in the upcoming year with improved margins. In that regard, we are disappointed to report that one of IDTI's most promising diversification efforts (Clear Logic; ALTR-$33-NR substitute parts) is on a slower ramp than we anticipated. But another (Centaur; x86) is among the beneficiary's of AMD's-$19 3/4-3 volume shortfall, and that positive should more than compensate. Meanwhile, in April, a graphics accelerator is scheduled; IDTI also is introducing specialty memories for ATM switches. WE CONTINUE TO BELIEVE THIS PORTFOLIO OF PRODUCTS WILL BE VERY WELL RECEIVED AS THE YEAR ADVANCES, AND WE ARE MAINTAINING OUR $16 1 YEAR TARGET. THE BAD NEWS: CLEAR LOGIC WILL TAKE AN EXTRA YEAR TO RAMP UNLESS IDTI COMMITS MORE FUNDING SOONER. Last week IDTI officially released their Clear Logic product line. As expected, IDTI's Clear Logic subsidiary is offering drop in replacement parts for chips made by ALTR. The Clear Logic parts are programmed with a laser and can be delivered in a matter of days in quantities as few a 1. The parts promise to be much faster and ...(Cont'd) IDTI Page 2 lower cost than the ALTR parts they replace. The bad news is that the initial family that Clear Logic targets is the ALTR 8K, a line we size at just $15 mil. per quarter. We believe 8K sales peaked at $24 mil. per quarter almost a year ago. We had anticipated Clear Logic to target the 7K family ($74 mil. in quarterly sales). IT IS UNCLEAR TO US HOW LONG IT WILL TAKE CLEAR LOGIC TO REGROUP AND FOCUS ON LARGER OPPORTUNITIES, BUT OUR TARGET OF $10 MIL. IN SALES IN DEC. FY3Q99 (AND $18 MIL. FOR FY99 OVERALL) NOW LOOKS VERY OPTIMISTIC. WE WOULD CUT THOSE NUMBERS IN HALF. THE GOOD NEWS: 1ST FAVORABLE CUSTOMER REPORTS ON IDTI's CENTAUR X86. We are receiving first reports from customers. These third tier clone makers (and key vendors into the PC upgrade market) are positive. IDTI's reception has improved due to ongoing volume problems at AMD. Despite the perceived tough competition posed by INTC-$82 1/2-3, it appears well priced parts are well received. In that regard, we were surprised to learn recently that NSM's-$27 3/4-2 Cyrix averaged at least $65-70 on its MediaGX (sold exclusively to Compaq) last quarter, roughly a 20-30% higher ASP than we expected. OUR MODELS INCLUDE $67 MIL. OF CENTAUR SALES IN MARCH FY99, AND WE BELIEVE IDTI COULD WELL BEAT THAT BY 50%. ON BALANCE, WE CONTINUE TO FAVOR IDTI AS A BETTER PLAY ON THE MEMORY MARKET. We are skeptical of short term memory move in memory prices which has pushed MU-$34 1/2-4 sharply higher. Still, if commodity prices really are beginning to improve, IDTI's SRAM business and other core operations, now running flat, should see a benefit. Meanwhile, WE SEE A STRONG CORE OF UNDERLYING VALUE IN IDTI'S NEW BUSINESS VENTURES WHICH SHOULD ALLOW FOR HIGHER LONG TERM GROWTH AND PROFIT MARGINS. BUSINESS DESCRIPTION: Leading fast SRAM, specialty memory, and high speed logic chip supplier with a position in RISC microcontroller/ microprocessors. Increasingly targeting communications markets (50% of sales) and other new, high value added proprietary segments. ------------------------------------------------------------------------------ Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. B-An employee of Lehman Brothers Inc. is a director of this company. C-Lehman Brothers Inc. makes a market in the securities of this company. G-The Lehman Brothers analyst who covers this company also has position in its securities.