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  • monrio1 monrio1 Jun 11, 2002 7:46 AM Flag

    OT: Communications Chips (Intel)

    Is Intel really top dog in communications chips?

    By Darrell Dunn
    (06/10/02 10:40 a.m. EST)
    A study of communications IC market leaders by Gartner Dataquest provides some validation for Intel's strong communications push of the past few years, but analysts and competitors last week questioned its significance.

    Flash in the pan?
    �They can say they are number one in communications, but the communications market doesn't know it yet,� said Will Strauss, an analyst at Forward Concepts Co., Tempe, Ariz. �They still don't have credibility. ... It's a flawed view. I don't know of anyone who considers flash a communications chip. They have plenty of money and want to be someone in the market. They will get there, but they aren't there yet.�

    Jeremey Donovan, an analyst at Gartner Dataquest in Chicago, who prepared the communications IC market results, said that, historically, a company with a strong general-purpose semiconductor portfolio has secured the leadership position. Previously, Motorola led with embedded processors, and last year Intel did with flash.

    �When a lot of people think about communications ICs, they think about application-specific devices like PHYs and framers where companies like PMC-Sierra, Broadcom, and others are doing well,� Donovan said. �That's also an area where Intel wants to become stronger. They've been progressing up the rankings a little each year, but their real strength in the past year was flash.�

    All-around player
    Maloney counters that while flash remains the bulk of its communications IC sales, Intel has made significant progress in network processors, optical components, and Gigabit Ethernet devices. According to Gartner Dataquest, Intel led in network processors with revenue of $25 million, up from $12 million in 2000, was third in Gigabit Ethernet ICs with $12 million, and entered the optical module rankings at 18th with $10 million in revenue.

    But while increasing its stature in the communications market, the business currently remains a loss leader for Intel, which has lost hundreds of millions of dollars on a P&L basis and absorbed billions of dollars in R&D and M&A costs.

    �At this point, it's really hard to get excited about it because it has so little impact on the bottom line for the company. Revenues for Intel are still around 80/20 PC to communications, and most of that revenue is flash,� said Dan Scovel, an analyst at Needham & Co. Inc. in New York.

    �Anyone today who says the communications market is finished is just as mistaken as those in 2000 who said was where to put your money,� he said. �We started as a memory company and invested heavily in microprocessors. What happened there? It comes down to whether you believe long-term there is a market, and if you can structure to win it.

    �There is a market and it will bounce back,� Maloney said. �People want to be connected always, everywhere. We're getting back to our roots: make the most advanced components on the most advanced process and out-R&D the other guys.�

    Market competitors could also find some good news in the results. TI moved from third to first in application-specific ICs. Motorola was first in communications processors. Agere was No. 1 overall, when optical components were added in, and first in switch ICs. PMC-Sierra was first in application-specific ICs for ATM. Applied Micro Circuits was first in application-specific ICs for Sonet/SDH.

    �I think TI or Agere have a better overall claim to communications IC leadership. But if you define your parameters right, you can be number one in anything,� Strauss said.

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    • Thanks for clearing that up. I appreciate it.

    • Put even more simply - If the Maturity Date on the Govt Bond is > 1 year Accounting Practice dictates that such an item MUST be stated as a Long Term Investment even though for most people (assuming we're not taking serious rate risk)it's as good as cash.

      Gee it's tough being a Corp CFO these days:
      You use Proforma EPS - they kill you
      You use Accounting Standards - they kill you.

      Heck I'm not a big fan of the current CFO here but give him a break.

      Just one more sign that these markets are full of nothing but FUD right now. The US investment community has joined the ranks of The Great Naval Inspectors (ie the belly button kind)of our time.
      Somebody better do something about it before 2003 but maybe they won't ?

    • Because its cash that is tied up in investments for long term purposes. They only consider cash and equivalents (see below) when disclosing cash readily available for operations. They believe that they have adequate cash on hand to meet their needs. Here is a statement from the 10Q about the investments...hope this helps.

      <<The primary objective of our investment activities is to preserve principal
      while at the same time maximizing the income we receive from our investments
      without significantly increasing risk. Some of the securities that we may invest
      in may be subject to market risk. This means that a change in prevailing
      interest rates may cause the principal amount of the investment to fluctuate.
      For example, if we hold a security that was issued with a fixed interest rate at
      the then-prevailing rate and the prevailing interest rate later rises, the
      principal amount of our investment will probably decline. To minimize this risk
      in the future, we intend to maintain our portfolio of cash equivalents and
      short-term investments in a variety of securities, including commercial paper,
      money market funds, government and non-government debt securities and
      certificates of deposit. As of March 31, 2002, substantially all of our
      short-term investments were in money market funds, certificates of deposit, or
      high-quality commercial paper. Long term securities are primarily comprised of
      AA or better corporate bonds and U.S. Government backed securities.<<

    • We all have seen that but why doesn't GSPN acknowledge the longterm investment asset portion as cash?

    • DSL is growing. 618 million in cash as of last quarter. THAT'S CASH! 2002 Sales 320-340 million. Treading breakeven.

      Warren Buffet may even buy this one as a value play - my god!