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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (22123)	7/24/1998 10:03:00 AM
From: Wally Mastroly	Read Replies (2) \| Respond to of 70976

CS First Boston coverage initiated as a Buy : biz.yahoo.com

To: Ramsey Su who wrote (22123)	7/24/1998 11:06:00 AM
From: Teri Skogerboe	Read Replies (1) \| Respond to of 70976

Ramsey, Katherine, Another piece for our puzzle... and a good piece, bold emphasis is mine. IMO, this shoots their 4-9% excess capacity projection of DRAM in the foot (or is it head). Though we probably need to keep hunting to nail this down further. your thoughts?? IDTI Announces Results of First Quarter of Fiscal Year 1999; Announces Plans to Improve Financial Results Business Wire - July 22, 1998 16:47 SANTA CLARA, Calif.--(BUSINESS WIRE)--July 22, 1998--IDT (Nasdaq: IDTI) today announced results for the first quarter ended June 28, 1998. First-quarter revenues were $134.5 million, a 10.5 percent decrease from the immediately prior quarter, and a 9.7 percent decrease from $148.8 million in the year-ago quarter. First-quarter net loss was $50.0 million (including a non-recurring after tax charge of $31.1 million) or $.61 per share net. Loss from operations was $.23 per share. Earnings were $.02 per share in both the immediately prior quarter and year-ago quarter. Reflecting the semiconductor industry slowdown and product mix changes, the Company's average selling price (ASP) and units shipped were down compared to the immediately prior quarter. During Q1, operating costs increased as a result of manufacturing, sales and marketing programs initiated several quarters ago, primarily associated with anticipated expansion of IDT's WinChip(tm) microprocessor business. These factors, together with the non-recurring charge, resulted in the Company's net loss for the quarter. Due to the reduced business outlook for the balance of fiscal 1999, IDT reduced its effective tax rate for the year from 28 to 10 percent. "Like many of the companies in our industry, our first quarter operating performance was disappointing," said Len Perham, president and chief executive officer. "The global slowdown in the semiconductor industry, the continuing economic crisis in Asia, and continued oversupply conditions, have created a very difficult market environment. The proliferation of Far Eastern foundries, coupled with the 'hidden capacity' increases associated with the rapid move from .6- to .5- to .2-micron manufacturing processes, has resulted in capacity increases far in excess of what the industry can absorb in the near term." Revenues from the Company's WinChip x86 microprocessors have not ramped sufficiently to offset the decline in SRAM revenue. This is largely due to a faster-than-expected shift in demand within the sub-$1000 desktop PC market, from 200-MHz to 266-MHz processor speeds and the slow transition of the WinChip product line to higher clock speeds. Q1 Fiscal 99 Non-Recurring Charge As anticipated in IDT's press release dated June 2, 1998, first-quarter fiscal 1999 results include a non-recurring charge which amounted to $34.6 million on a pre-tax basis ($31.1 after tax), relating primarily to excess SRAM manufacturing equipment and technology licensing matters. The charge was recorded in the statement of operations as follows: $28.9 million specifically identified as cost of sales, $5.5 million recorded as research and development; $0.2 million recorded as general and administration. The Q1 non-recurring charge included the following: -- Provision for excess manufacturing equipment: Reflecting current economic conditions in the SRAM marketplace, which continues to experience declines in both demand and price, the Company identified specific items of manufacturing equipment, which are excess to its needs. The excess equipment was either written off or its carrying value reduced to its estimated fair market value, as provided by accounting rules. -- Provision for narrowing business development: The Company is narrowing the focus of business development activities to those initiatives where results are likely to produce the most favorable financial returns. As a result, the Company is discontinuing certain development efforts and has provided for remaining payments required under technology license agreements and recognized other related exit costs. -- Provision for other intellectual property-related matters. The majority of the costs recognized in the Q1 non-recurring charge are non-cash in nature, and payment associated with some of the technology and intellectual property matters will likely be made over an extended period of time. Plans to Improve Financial Results In the fourth quarter of last fiscal year IDT's forecast for fiscal 1999 anticipated a stronger semiconductor industry with higher sales volumes, better utilization of manufacturing capacity and improved profitability. Anticipated higher revenues and volumes did not materialize during fiscal Q1 due to changed overall market conditions, including lower demand and reduced prices for SRAM and x86 microprocessors, as well as continued decline in business in the Asia Pacific region. In an effort to return to profitability, the Company will implement the following actions with a goal of generating annualized savings of more than $45 million: ...snipped...

To: Ramsey Su who wrote (22123)	7/24/1998 11:10:00 AM
From: Katherine Derbyshire	Read Replies (1) \| Respond to of 70976

Since I don't know how Lehman did their calculation, I'm not going to say their DRAM capacity number is wrong. Yes, DRAM demand has increased, so capacity and demand probably are closer together than in 1996. Instead, my point is that DRAM capacity isn't the whole story. For instance, the Taiwanese industry, responsible for some of the most worrisome utilization reports, is primarily foundry-driven. Furthermore, some of the DRAM companies seem to be shifting excess capacity to foundries, easing the DRAM problem but making the foundry problem worse. Katherine