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Technology Stocks : Seeq Technology Coming Back.... -- Ignore unavailable to you. Want to Upgrade?

To: Marc Phelan who wrote (1562)	2/12/1998 5:53:00 AM
From: stockaholic	Read Replies (2) \| Respond to of 2127

As Networking Tide Surges, Chipmakers Ride The Wave Date: 2/12/98 Author: Michele Hostetler This year will be a highflier for chips that help push data around a network. Networking chips will post more sales growth in '98 than in any of the next three years, says San Jose, Calif., market researcher Dataquest Inc. Evolving networking technology is adding fuel to a market that already has been growing steadily. New networks that send both voice and data will boost the need for new chips. So will the fact that these chips are handling more of the work once done by software. The result is a hot market. ''(Networking chips are) growing faster than the rest of the chip market,'' said Greg Sheppard, a Dataquest analyst. ''It's definitely a good place to be.'' The networking chip market is surging at about 20% annually, compared with 16% for the overall chip market, he says. The $26.4 billion networking equipment industry is desperate for any speed advantage. Networking firms are turning to the $138 billion chip industry to boost bogged-down networks. ''The trend that is taking place in corporate intranets and the Internet is taking over the (chip and networking) marketplace,'' said Gary Smerdon, networking product marketing director for Sunnyvale, Calif.-based Advanced Micro Devices Inc. That's good news for chipmakers that need a steady source of income while they struggle in other areas. AMD, for example, still is trying to make headway against leader Intel Corp. in the market for microprocessors, the brains of a PC. In '96, the top players in the $2.2 billion worldwide local-area-network chip market were: National Semiconductor Corp. with 20% of the sales, AMD with 16.5%, Lucent Technologies Inc. with 14.9%, LSI Logic Corp. with 11% and Texas Instruments Inc. with 6.9%. The rankings have remained steady the past few years. But Texas Instruments is newly aggressive, says Diane Myers, an analyst with market researcher In-Stat Inc. of Scottsdale, Ariz. She says Texas Instruments is making strides to grab market share. Even small firms can carve out their spots in networking chips. For example, Fremont, Calif.- based Seeq Technology Inc. is building its business on Fast Ethernet chips. Fast Ethernet could comprise 55% of Seeq revenue in its fiscal year ending in September, says CEO Phil Salsbury. That's up from 30% of its $31.3 million in fiscal sales last year. Networking chip firms like Seeq and San Jose, Calif.-based Galileo Technology Ltd. hope to capitalize on new technology trends. First Ethernet exploded in the late '80s and became the most common networking technology. Fast Ethernet, which is 10 times speedier than Ethernet, hit the market in '94. Now it's Gigabit Ethernet that's expected to give chipmakers another push. It's 10 times quicker than Fast Ethernet. There are about 120 million PC-to-network connections, or ports, today, says Salsbury. He says about one-third are Fast Ethernet, compared with about one in eight of the 80 million ports in '96. And there should be about 3 million Gigabit Ethernet connections this year, Salsbury estimates, from virtually none last year. Also, data-networking companies are working fast to converge voice and data onto one network. These new networks will require new chips, AMD's Smerdon says. Smarter silicon is another reason chipmakers are seeing their networking business boom. Where once a microprocessor and software handled most networking duties, that capability now is built into silicon. So chips have become more complex. And chipmakers must become intimately familiar with the inner workings of networks. ''It's no longer throwing jelly beans over the wall,'' Dataquest's Sheppard said. ''You have to have chips honed to the networks.'' That's an advantage to established chipmakers because such complexity keeps out nominal players, says Galileo President Manuel Alba. He notes that many networking chips are more complex than Intel Pentium microprocessors. Chipmakers want to make networking chips even more complex. The more sophisticated and desirable a chip becomes, the higher the profit margin, analysts say. The next step is ''system on a chip,'' which builds technology from several chips into one. National Semiconductor has targeted system on a chip as a prime moneymaker. This intense customization could be the next wave in networking, says Don Macleod, chief financial officer for Santa Clara, Calif.-based National Semiconductor. National Semiconductor is talking with the major networking firms to create systems on a chip for their gear, Macleod says. This chip could cut networking companies' costs and speed product development, he says. ''Our goal is to have significant ystem on a chip) revenue in '99 coming out of networking and personal systems,'' Macleod said. -------------------------------------------------------------------------------- (C) Copyright 1998 Investors Business Daily, Inc. Metadata: AMD INTC NSM LU LSI TXN SEEQ GALTF I/3675 I/4890 I/3679 E/IBD