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

To: AJBurl who wrote (7431)	3/18/1998 1:54:00 PM
From: Rob S.	Respond to of 11555

Brian had said that IDTI was not willing to negotiate an agreement with IBM that included similar co-marketing and private labeling concessions to that given up by AMD and Cyrix. What IDTI primarily wanted was a straight-forward fab agreement: "you build 'em for us and we will pay you $xxx.xx per wafer, period. If we have you do the packaging, we will pay so much for that." I don't know if IDT was able to stick by their guns in these negotiations or if IBM and others played hardball and got the concessions. There were no details given in the announcement that would say one way or the other as far as I have seen. AMD was in a desperate negotiating position - they had promised parts to Compaq and other OEMs and haven't been able to deliver as much product as needed. AMD has huge sunk costs investments to pay off so they have little choice but to crank up the volume one way or the other. Cyrix had designs but no in-house mfg. capability. These things put them at a huge disadvantage in negotiations. IDT, on the other hand, did not absolutely have to sign an agreement with an outside fab partner. (Here is where being able to demonstrate high yields adds significantly to IDT's strengths in negotiating - with high yields, making the parts at SGS, TI, etc. or in-house is viable - you don't need IBM's raw mfg, capacity to get you out of trouble nearly as much). Although this gives them several advantages, it was not absolutely necessary for survival or even respectable growth. Not having an agreement would leave IDTI more vulnerable to what is likely to become a more agressive market for uPs, but wouldn't necessarily stop them. Being the lean, clean, fuel-efficient machine in a field of ten-ton road warriors could have it's merits if you managed to be able to maneuver quickly and adroitly and attack specific weaknesses. We need to get better answers to this field of questioning from IDT management.