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

To: brooklyn dodger who wrote (8772)	6/6/1998 5:51:00 PM
From: Rob S.	Respond to of 11555

Yes, IDTI is betting the farm on WinChip to more than make up for lost SRAM sales. However, they do have other products that are doing well. The company gambled on building facilities that increase their manufacturing capacity (when fully equipped) by something like 2/3s and at competitive 0.25 micron and smaller capability. The problem with making that major of an expenditure relative to IDT's size is that it makes great sense only if it is filled with profitable products. The WinChip 2 has the greatest chance of filling up that capacity quickly. Otherwise it is burning a whole through the profits. Sales are falling short this quarter because the bottom dropped out of the market for the C6 200 Mhz X86 uP and they weren't successful in bumping the parts up to 240 and 266 Mhz. IDT just didn't think it was worth trying to bump up the speeds when they had the WinChip 2 coming along that they needed to focus engineering resources on. When the price of 200 Mhz parts dropped to around $40 and demand dried up even at that price, the WinChip just didn't contribute to sales and earnings or take up the slack from discontinued and weak SRAM sales as expected. The carrot for investors, and what Murphy, Infras and other tech analyts/newletters have figured out is that IDT has tremendous leverage - if they can produce a large quantity of parts to meet the sweet spot of the market, the increase in sales and earnings will be huge compared to the company's size. The company has not met their goals and earnings for the next quarter or two will suffer. They have the expense of the ramp of the WC 2 while cash flows have not started to come in. IDTI is speculative because of the "sink or swim" position they are in for a large potential part of their overall sales - but the chance of their success is better than many people think. The WC 2 is "pivotal" to the stock continuing to sink or it soaring. It could easily double in a year or it could sink to 5 or 6. IDT won't disappear by any means because they have other currently viable business and substantial equity.