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Technology Stocks : Phoenix Technologies (PTEC) -- Ignore unavailable to you. Want to Upgrade?

To: Marc Phelan who wrote (3246)	4/18/1999 6:36:00 PM
From: John B. Dillon	Respond to of 3624

Marc, Amy, Jules and others: Thank you for the excellent recap of the conference call. I think I heard things a little different with my thoughts below. Overall, it appears to be a very good quarter. IP was the highlight up over 95% (Jack said over 95% and Bill's % was higher) with over $5,000,000 in sales for the quarter. These numbers included the Sand acquisition, without Sand IP was still up 38%. IP has over 300 customers and 400 design wins. I think they said that 12 % of this business is repeat royalties and they are starting to see a multiplier effect. The BIOS business is confusing at best, but it is clear that there has been a dramatic shift to the lower cost Award BIOS with Taiwan motherboards. (Sounds like it was very good that PTEC's bought Award) BIOS prices are stable for both the high and low end. PTEC will not chase incremental BIOS business for lower margins. Jack feels that pricing pressures will force more business to Taiwan with Award BIOS. Eventually, with Merced shipping in quantities, we may see an increase in top line revenue for the BIOS business. The pricing for the Merced BIOS will be much higher than anything they have ever seen. Notebook BIOS were above expectations due to IBM starting to ship the Note BIOS. It sounded like Secure Agent and ROM Pilot are not profitable. Secure agent has the best chance of becoming profitable soon with biometric authentication devices. NEC is shipping Secure Agent. Jack feels that ROM pilot will eventually be successful. These products will also show up in internet appliances. The appliance business was flat due to prepaid revenues received last quarter. PTEC still expects this business to grow 20% this year, but were not overly convincing. Engineering R&D was reduced from 36% to 31% and they are on track to reduce it below 30% and still expect operating margins at 18% by the year end. Over due receivables were up due to bandwidth issues with Europe collections. John Bar from Needham was very positive especially with the EPS growth. Jack could not commit to the stock buy back program continuing, but they had a Board of Directors meeting on Friday and I am sure they will make the announcement on Monday. When they announced their top five customers I was surprised that Compaq and IBM were not mentioned. I thought Compaq was shipping PTEC BIOS exclusively for their home computer division. I am disappointed with no revenue growth and Jack was not ready to commit to top line growth at this time. However, with a stock buy back, reduced R&D two high growth divisions, a BIOS cash cow, $80,000,000 in the bank this stock is very undervalued and I see years of increasing EPS. I will appreciate comments on the above. jd