Markets have reached such heady heights that even the super-bulls are getting nervous, and the uncomfortable mood was reflected at last week’s Robertson Stephens & Co technology conference at the Ritz Carlton in San Francisco, where a shock profits warning from LSI Logic Corp set the nervy tone: reporters from Reuters and Dow Jones & Co were on hand to do the honors. f r i Getting under way with the prime culprit, LSI Logic Corp was represented by its vice-president of corporate communications, Bruce Entin, who tried to soothe jumpy nerves by saying that the company’s announcement of a first quarter earnings shortfall may be its low water mark in earnings this year, while carefully warning that the current semiconductor environment was tough to call with confidence; the trouble was caused by cancellations of orders by a small number of personal computer makers – in 1995 the personal computer business was about 20% of LSI’s total revenues whereas in the first quarter, the personal computer business slumped to between zero to 5% of revenues – the reality is that for us the PC business almost went away, Entin told the conference. f r i Rather more upbeat was Cypress Semiconductor Corp, whose vice- president of marketing and sales, Daniel McCranie, said that despite pricing pressure in the static RAM market which comprises about half of it business, the company expects gross margins for its first quarter ending early in April to be higher. s c o Micron Technology Inc chief financial officer Bill Stover brought the assembly right back down to earth by saying that uncertain pricing of dynamic random access memory chips is likely to continue until personal computer manufacturers use up the large inventories that have been putting downward pressure on prices: It is difficult to forecast what the market is going to do, Stover told the conference, noting that the process of setting prices includes determining when manufacturer inventories would decrease; he told of one customer with 35 days of inventory, or 81m units, who is shrinking that to about 31m; he cautioned that Micron’s decision to postpone completion of its new 8 wafer fab in Lehi, Utah could see its present 5% to 6% share of the global memory chip market fall if sales suddenly surged, but the Lehi plant was planned to boost Micron’s worldwide market share to upwards of 10% when it comes online; the Idaho company expects to maintains its position as a low cost leader in the market. f r i Client-server support applications specialist Remedy Corp says it is comfortable it can meet financial estimates that average out at about $1.07 per share this year. conference CUC International Inc says it does plan to make more acquisitions in the future, but they will be smaller than its proposed $2,000m buy of Sierra On-Line Inc and Davidson & Associates Inc, both of which were represented at the conference: its chairman and chief executive Walter Forbes said that future acquisitions will be much smaller to fill in gaps in its on- line shopping strategy, and that it will try to add new areas to enhance consumer spending – although We’ve done the big one, Forbes asserted. s c o Davidson & Associates Inc chief executive Bob Davidson was on hand to say that the company’s full year 1995 earnings report would not disappoint the market: Davidson said the personal computer software business has never been better for his company despite gloomy predictions from analysts that computer and software sales are slowing; addressing another worry, he said that the company is not feeling pressure on its high-end software product prices from lower quality, so-called value-priced software. f r i As for CUC’s other acquisition, Sierra On-Line Inc, Michael Brochu, president and chief operating officer, is cautiously optimistic about its fourth quarter ending this month: the company’s Windows95 only products are still expected to have slow sales, continuing the trend of the previous quarter, Brochu told the conference; he attributed the slow sales to the fact that consumers’ conversion to
Windows95 isn’t happening quite as quickly as expected, but Sierra still makes MS-DOS and Windows 3.1 back-up versions of its products; the interactive entertainment, education and productivity software for the home consumer will consolidate, Brochu reckons – he expects only five to 10 major players in the future; he also estimates that 50% of Sierra On-Line revenue will be derived from the Internet in five years – most current development projects have Internet links. s c o For a company firmly in the fun-and-games end of the business, life has not been much fun for 3DO Co Inc so far, but chief executive Trip Hawkins says that the games player designer hopes to produce its first quarter of profits this spring, which would mark an earnings turnaround for the game soft- and hardware designer: Keith Benjamin, who is an analyst with the conference host, Robertson, Stephens & Co, estimates that the Interactive Multiplayer company will earn 0.04 a share for its fiscal fourth quarter to March 31, but Hawkins was not prepared to say whether Benjamin was warm or not. f r i s c o Western Digital Corp, a disk drive marker and not much else these days, sent the chairman along to tell the conference that the company expects its Rochester, Minnesota plant to start full production of high-end drives in late August or early September: chairman, president and chief executive Charles Haggerty said production of the personal computer disk drives will start at the end of April, and the company sees potential in the high-end market – it is aiming to achieve $1,000m in revenues from this sector – where margins are higher compared with the desktop sector – by 1999; Western Digital is also planning to expand in the mobile sector of the disk business and is looking at other areas as well. f r i Disk head maker Read-Rite Corp sees the worldwide disk drive market growing at a 15% to 20% rate and its recording heads component market growing at 20% to 25% a year – and Read-Rite will benefit from the increasing number of heads used per disk drive, chairman and chief executive Cyril Yansouni declared: Read-Rite intends to expand its position in the high-end and removable market segments during 1996, expanding from its stronghold of heads for disk drives used in personal computers; it will continue to expand its inductive technology this year, but will finally be ramping up magneto-resistive heads for volume production; it also intends to capitalise on its head-stack manufacturing investment and to expand its presence in Japan. s c o VeriFone Inc’s Roger Bertman, vice-president and general manager of the EIT/Internet commerce division, marched to the podium to assert that Verifone considers the Internet a potentially explosive marketplace: Consumers will have the chance to reach merchants from around the world, Bertman said, noting that one of the factors required for this explosion was the build-up of an Internet payment infrastructure, something that Verifone is actively addressing: currently, payment transactions are not secure, payment management applications are not provided and transaction fees are high due to risk, he said, promising that these were all problems that will be resolved in the next few years. f r i US Robotics Inc chief financial officer Mark Remissong arrived at the platform to say that the diversifying modem manufacturer is comfortable with its current gross margins of 41.8% of revenues going forward; he is also comfortable with analysts’ current financial models for the company, but he declined to be more specific. s c o Payroll processor Paychex Inc’s executive vice-president John Carlen is comfortable with estimates of $0.27 per share for this quarter.