MMX to ignite consumer, corporate demand in '97

Electronic News, Sept 2, 1996 by Carol Haber

NYSSA Forum: Wall Street Gauges Semi Outlook

New York--The only healthy cycle is a technology-driven cycle--and new technology will drive a very strong cycle for the industry in 1997, with Intel-related MMX (multimedia technology) at the helm, said Drew Peck of Cowen & Co., at a meeting of The New York Society of Securities Analysts (NYSSA) here.

Corporate and consumer markets will be irresistibly drawn to new machines that perform tasks and functions for which they were never intended and which are fairly affordable, the analyst said.

Unveiled in March, Intel's MMX technology is a multimedia instructions set designed to enhance Intel's architecture and to let software developers deliver next-generation high-performance multimedia and communications applications to advance the PC as a computing and entertainment platform.

At the NYSSA forum, Mr. Peck stressed demand issues--and not the pricing of memories, "which has never been driven by demand"--in his view of the coming year.

"Currently PC demand is fairly strong because of generally lower prices, but it can't continue. There's a lot of weakness out there. As prices on PCs stop going down, we could see short-term sluggishness out there," he said.

The new technology will result in a very strong cycle in 1997, particularly Intel-related MMX technology, "which enables PCs to perform tasks and functions for which they were never intended. Today they are horribly suited for video conferencing modem functions. MMX genuinely changes that, giving digital signal processing power to the MPU. It can't replace the full power of the digital signal processor, but it can do a lot of it."

Next year, new features in PCs will drive demand for consumer-based PCs in the form of upgrades. It will reduce total cost of PC multimedia functions so that new demographic elements can enter the marketplace, he said. The total market opportunity will be larger as well. "You will want one of these machines, I guarantee you," Mr. Peck said.

Meanwhile, "Intel will be converting all Pentium products to MMX capability. It will be broadly available and fairly affordable."

The long-awaited corporate upgrade cycle will finally begin in 1997, he predicted. Currently about 70 percent of the installed base of corporate PCs use 486 or even 386s, he said. "We haven't yet seen the sweet spot of the corporate upgrade market...It is going to happen in 1997. The upgrade will take place because it is now affordable. I see Windows NT as icing on the cake."

Mr. Peck said analog companies, such as Analog Devices and others, will be playing a big role in the technology transformation, and will be beneficiaries of the trend. "Semiconductors are the right way to play this; that's where the added value is coming from," the analyst suggested. "Intel will benefit peripherally because PCs will take advantage of higher bandwidth. Analog companies are at the top, DSP guys next."

There are implications for the modem chip, too.

MMX will have a dramatic impact on the audio portion of the market, Mr. Peck said, adding that the market will change "dramatically" within the next 18 months.

Can MMX eliminate modems? "Yes," Mr. Peck said. "You can duplicate all functions of modem chips with MMX with very small exception. But will it happen? No. The price of modems will go down to $20, modem prices will start to cave in. The modem business will be transformed. Modem companies will have to be fleet of foot and do software instead of hardware."

In the next 24 months there will be new appications developed in the professional environment that will require MMX technology, he said.

Intel's first MMX processor, code-named the P55C, was due to be released before Christmas this year but will now be released in 1Q97. The setback was blamed on an anticipated shortage of 200MHz chips, the preferred speed to execute the P55C's MMX multimedia extensions (EN, The Circuit, Aug. 19).