Digital Equipment Corp reckons it could break into the top five personal computer sellers in the next two to three years from its current number 10 slot: Vincent Mullarkey, chief financial officer, told the Bear Stearns Technology Conference in New York that business had grown to $3,000m from about $500m a couple of years ago – and would continue to grow; DEC, he said, has not yet finished with its transition and will take another year to stabilise; it had cut staff by 60% in the last two years to 60,000 employees, while managing small revenue growth; Windows NT, disk arrays, video interactive information services and the converged network products market were important growth areas; DEC was on track for sustainable profit, Mullarkey added but he didn’t provide an exact timetable for this.
Personal computer makers may be crying out for semiconductors but one the majors, Texas Instruments Inc has welcomed the shortage saying it keeps prices stable: speaking at the conference, vice-chairman Pat Weber said the demand was insatiable and the company projected more than 30% growth in the global market in 1995, a revision upwards from estimates of 28% earlier in the year; the figures are based on assumptions about the continued strong demand for personal computers and telecommunications equipment seen so far this year, and the weakness of the dollar; Japanese demand would grow 23%, the rest of the Asia-Pacific region would rise 28%, the US 28% and Europe 30%; and he predicted a long-term growth rate of 15% to 20% versus the 13% to 15% seen historically; the signal processing market would grow to a $10,000m business by the year 2000 and the digital imaging market to $23,000m; to prepare for this acceleration in demand, Weber said that the company would invest $850m in 1995 compared with $689m in 1994, and hoped to increase its market share, offsetting the reduction in business at its defence unit but Texas was quite happy with the division.
Northern Telecom Ltd expects a quarter of all its sales to come from wireless phone equipment by the year 2000, said Bob Hunsberger, vice-president, sales and marketing of wireless network: in the first quarter of this year 14% came from that sector, up from 10% in 1994; the same equipment can be modified for both cellular phone and wireless local-loop applications – where wireless phones are used instead of wired ones, especially in developing countries; in Personal Communications Services, the company is backing two horses – code division multiple access, CDMA, and Personal Communication Services 1900, as neither standard was sufficient to meet the demands of the marketplace on its own, he said.
Sold out – those two charmed words that translate into strong continued product demand have cropped up again and again in the companies making presentations at the Bear Stearns conference reports Reuters: in response, analysts have boosted estimates and investors have responded enthusiastically, driving stocks sharply higher; Looks like we’re not going to see the summer doldrums, said Larry Jones, chief investment officer for WR Lazard & Co, one of the more than 1,200 analysts and fund managers that attended the conference last week; he added What I’m seeing here for semiconductor companies is very powerful order levels that they are having difficulty keeping up with; and dozens of company officials have repeated the same story – product demand continues to outstrip production capacity, especially among semiconductor makers and equipment suppliers, with chip makers reporting that demand stems not just from personal computers but also from cellular phones and other wireless communications, digital imaging displays, and car technology, removing the market’s former dependence on computers; also buoying the hopes of attendees has been Microsoft Corp’s promise of delivering Windows95 on August 24, and the resulting opportunities for software, hardware, memory and disk makers to ride the wave of customer upgrades; Jones said that many more investors finally ap
pear to be coming round to the idea that technology industries have finally eliminated their once notorious cyclical nature, especially during the summer season.
An example of a company whose performance is being constrained because of component shortages is Gateway 2000 Inc, whose chairman, president and chief executive Ted Waitt re-iterated for the conference the warning issued by the company early in the quarter: calling 1995 a challenging year, he said we’ve been impacted by component shortages which are continuing in our second quarter, but added that We feel good about where we’ll exit the quarter in terms of component availability; Gateway has added new suppliers to help deal with its most serious shortages which were of CD-ROM drives, but it seems to have shot itself in the foot by allowing its inventories to run too high during last year’s second quarter and adopting an aggressive inventory management programme; Waitt was optimistic about prospects in Europe, a new market for Gateway, and in the consumer market, where it expects to grow.
Passive component maker Vishay Intertechnology Inc’s chairman and chief executive Felix Zandman supports analysts’ estimates that the company will earn $3.20 to $3.40 a share for 1995: with revenues in the range of $1,200m to $1,300m.
Semiconductor circuits account for 5% to 10% of non-computer electronics, with an even higher percentage going into computers; within five years, the overall make-up of non-computer electronic goods, such as cell phones, television set-top boxes and automobiles, will consist of 20% silicon circuitry, ensuring long-term chip demand, according to chip maker LSI Logic Corp’s vice-president Bruce Entin: as a result the company expects revenues to grow by more than 30% in 1995 and by at least 25% in 1996, although this figure could be higher: Entin told the Bear Stearns meeting that there was no let up in sight in the chip shortage and the company has continued to have to allocate its chip production to customers, which has allowed it to see margin expansion even as we expand plant capacity; in 1994, the company reported sales of $901.8m and profits of $108.8m; the goal next year is to boost gross margins to 50%, bettering 1995’s and 1994’s first quarter figures of 45% and 40.5% respectively; the c ompany’s two-for-one stock split, declared in May, became effective last week.
Admitting that not everyone understood why it failed to bid in the US federal auction of Personal Communications Services frequencies last year, MCI Communications Corp said its wireless strategy would pay off in the long run: Fred Briggs, chief engineering officer, said it had chosen not to spend millions of dollars in Personal Communications Services frequencies, opting instead to bide its time and get into wireless telephone service later through licensing or resale; he said frequency capacity will increase by 15 to 30 times in the next two to three years, and frequency owners are unlikely to fill all that capacity.
MCI Communications Corp’s Fred Griggs popped up again to say the company is planning to launch a service next year that it hopes will increase its share of the $5,500m a year US private line data market to 25% from the 10% it currently holds; it will combine Synchronous Optical Network technology with a graphical user interface to enable its business customers to build temporary private networks in a few seconds as they need them.
Advanced Micro Devices Inc vice-president Benjamin Anixter told the conference that there was no truth in the rumours that its next generation K5 chip is late, it doesn’t work, and (it’s) slow – the company said that it is on schedule with plans to produce the K5 in the first quarter of 1996, with pre-production K5 designs to be available to key partners in the fourth quarter of this year: Anixter wanted to set the record straight because he had been responding daily to rumours about the K5, he said.
