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Technology Stocks : Reliability Inc (REAL) -- Ignore unavailable to you. Want to Upgrade?

To: Shane M who wrote (483)	6/3/1998 10:03:00 PM
From: Scott D.	Respond to of 542

I suppose technically it is negative, but in an insignificant way. Unit chip volume is what is important to REAL, and it will probably be several years before Merced makes up a significant portion of Intel's unit volume.

To: Shane M who wrote (483)	6/4/1998 1:38:00 AM
From: pt	Read Replies (1) \| Respond to of 542

Re: Merced, I can only speculate. If you suppose that each new generation of chip from Intel carries with it some risk that Intel will stop using REAL for burn-in services, then the Merced delay means REAL's Intel revenue is assured for a bit longer than we previously knew. As Merced is a complete departure from all the microprocessors Intel has made since at least the 8088/8086, the risk of losing Intel would seem to be somewhat larger with Merced than with previous generations. If we know that REAL will win the Merced burn-in business, the delay is probably irrelevant. As Scott says, unit volume is what is most important to REAL. Fees for burning in Merceds will probably be higher than fees for burning in Pentiums, but there will be additional costs for R&D, new equipment, and transitional expenses as well. (I'm assuming that past comments by Edwards re: the conversion to 64 bit drams are also relevant to new CPU architectures.) A fair question for one of us to put to the company would be do they expect to win the Merced burn-in business? Other relevant issues, involve Intel's competitors. Who burns in AMD and Cyrix CPUs? As Intel's market share slips, REAL's growth will suffer if someone else is doing the burn-in for those chips. The market is not very impressed with Intel's (or Compaq's) near-term prospects. If those companies see demand slow-down (as opposed to pricing pressures), REAL will also suffer. Presently, the market does not seem able to distinguish between the pricing difficulties faced by many PC-related companies and the healthy unit demand growth that will benefit REAL. Unfortunately, the market has shown it is not very quick to correct undervaluations of REAL. Paul