It became clear at the end of last week that while the US personal computer market may be slowing down – particularly the business market and, according to Compaq Computer Corp, the market for personal computer servers, – the German market was teetering in the fourth quarter of last year and this quarter has fallen […]
It became clear at the end of last week that while the US personal computer market may be slowing down – particularly the business market and, according to Compaq Computer Corp, the market for personal computer servers, – the German market was teetering in the fourth quarter of last year and this quarter has fallen off a cliff – all the signs are that the stresses and strains in trying to align European economies in preparation for the utopian chimera of a monetary union and a single currency is driving continental Europe into an untimely recession at a time when a short-lived recovery has scarcely started to mop up any of the unemployment left over from the last recession.
Europe was not the first region in attendees’ thoughts at last week’s Robertson Stephens & Co investment conference in San Francisco, but by all accounts – or more particularly of Reuters and Dow Jones & Co, a rapidly fading personal computer market and all that entails very definitely was: executives at the conference said many personal computer manufacturers are churning through more than a month’s excess inventories of basic chips, making it difficult to judge what true demand will be once those stocks are exhausted – although sales of chips for other uses is booming.
If anyone thinks they have tremendous visibility… they have a better crystal ball than we do, said Bruce Entin, vice-president of corporate communications at LSI Logic Corp, which warned on Wednesday that first quarter earnings would fall 10% below expectations.
Much more upbeat was Kenneth Levy, chairman and chief executive of semiconductor fabrication equipment maker KLA Instruments Corp, who declared The stock market has correctly predicted 12 of the last three semiconductor downturns – you would not know if you were just looking at our bookings that there was any slowdown in the market, he added, nevertheless cautioning that Silicon Valley is taking the prospect of a slowdown seriously, and re- evaluating its business plans, although for KLA, the geographical spread in its businesses should help shield it from the shock of any downturn, with leading semiconductor makers under constant pressure to add ever more complex parts.
The Internet was another hot topic of conversation, but while successful investment in Internet-related companies has so far proved easy, the watchword at the conference was caution – Don’t think of the Web as a place to visit, think of it as a fundamental new environment, Dick Williams, president of Informix Corp’s newly acquired Illustra Group, urged investors; seek adaptable management and for companies that have specific business plans.
Advanced Micro Devices Inc cheered attendees at the Robertson Stephens investment conference with news that it expects its next generation microprocessor, the K6, to be sampling by the end of the year and in volume production in early 1997: bearer of the tidings was Ben Anixter, vice-president of external affairs, who also told the conference that sales of Flash memory chips will likely be more than $700m this year, up from over $500m in 1995; Anixter said the K6, which is compatible to Intel Corp’s Pentium Pro chip, is the first processor that Advanced Micro has produced at almost the same time as Intel.
Applied Materials Inc is the largest semiconductor equipment supplier, and its chief financial officer, Gerald Taylor, told the assembly that from what his office is seeing, the company should still grow its revenues by 8% on a quarter by quarter basis: We aren’t naive about the fact that the industry is going through a transition, but his company has not seen any change in customers’ order rates, and the Asia-Pacific region remains strong, he asserted, while North American orders are good.
Vitesse Semiconductor Corp is one of only two surviving Gallium Arsenide chipmakers in the US of any significance, and Louis Tomasetta, its president and chief executive used his five minutes at the podium to say that the Camarillo, California company sees i
ts markets for communications and testing chips growing in the coming years, although it expects lots of competition in the growing Fiber Channel market; he warned that it expects revenue growth in its testing equipment business to slow from last year’s rate of 90% to a range of 40% to 60%, but he noted that the company started from a very small base in prior years; the company will be somewhat exposed by having an excessive number of eggs in one basket this year, because AT&T Corp, which accounted for 17% of the company’s turnover in 1995, is expected to account for about 20% this year – but after that, the percentage should level off.
Printer manufacturer Printronix Inc was also represented by its president and chief executive, Robert Kleist, who told the investors that Printronix expects the transition to its fifth generation of line-matrix printers to be completed by the end of the current fiscal fourth quarter: the transition to the ProLine Series 5 had hurt revenue for Printronix’s third quarter ended in December because the company had to clean out its inventory of older products, but it sees solid demand in the current quarter.
Even Intel Corp grudgingly admits that there may be a market for the Internet access terminal, although it plays the thing down: it may eventually have a role in services such as remote banking but We don’t see generic consumer deployment, Paul Otellini, Intel senior vice-president and sales director said of Oracle Corp’s proposed Network Computer, later telling Reuters that use of its processors in such a computer would primarily be aimed at making it easier for customers to be weaned from such machines and onto full-scale personal computers – This is a sell-up opportunity and it’s easier to sell up from a Pentium to our architecture than from an ARM or a PowerPC to our architecture, so we’ll probably keep our nose in it, he told investors at the conference; As Andy Grove says, the PC is the most Darwinian device in the world, highlighting the versatility of the machine, which he was the best device for a combination of Internet, productivity and network use.
Cirrus Logic Inc is looking to the three-dimensional multimedia sector to be one of its largest growth areas in 1996, George Alexy, senior vice-president, marketing told the conference: Cirrus Logic has a variety of new products it expects to release in the three-dimensional multimedia sector in 1996, according to Alexy, and the company also sees the Internet providing many opportunities – it is working on technologies that are currently in field testing which will provide video playback in connection with the Internet, he said, and the company is also seeking to broaden its product line to cut dependence on the personal computer market.
Semiconductor Packaging Materials Co sent its chairman, Gilbert Raker along to address the conference, and his theme was the growing opportunities his company sees with its silicon wafer reclamation services unit as the total semiconductor business grows: silicon reclamation for testing and monitoring semiconductor production processes is growing because of substantial cost benefits to using reclaimed wafers in the manufacturing process, according to Raker – as each fab comes on stream, there is incentive to use reclaimed wafers, he suggested, adding that the use of virgin or testing silicon in the manufacturing process is considerably more expensive; for 1996, Semiconductor Packaging also wants to establish a wire manufacturing and sales center in the Far East, and he said it is aiming for improved gross margins from productivity and yield improvements from its Polese subsidiary, which manufactures seals, frames and heat dissipation products used to lower the operating temperatures of high power wireless communication devices and high-speed microprocessors.