SMC 1Q revs off 35%; loss posted

Electronic News, June 30, 1997

Quarterly results reflect lower revenues in SMC's Component Products and System Products divisions, versus 1Q97. When compared to 4Q97, both divisions reported higher revenues.

For the Component Products Division, the revenue gain from the just-prior fourth quarter was primarily due to increased unit sales of SMC PC input/output (I/O) products. During the first quarter, the Component Products division saw an increase in order-input rates and in the number of new PC motherboard designs that incorporate its I/O circuits. As a result of these design wins, the division expects improved performance in the second and third quarters versus the first quarter.

SMC expressed concern with "substantial losses" and resulting negative cash flow associated with its System Products Division. The company is currently pursuing strategies to reduce these losses. Adding to the pressure on the division during the first quarter, Fast Ethernet adapter unit selling prices and gross margins decreased because of sharply lower retail prices initiated in February by some of the division's competitors, SMC said.

The Component Products Division provided 47.3 percent of revenues during the quarter versus 56.0 percent a year earlier, and the System Products Division provided 46.2 percent of revenues versus 39.5 percent in the comparable period of the prior fiscal year. SMC's Japanese subsidiary, Toyo Microsystems Corp., provided 6.5 percent of revenues versus 4.5 percent in 1Q97.

In March 1997, it was announced that Intel had agreed to make an equity investment in SMC, with the terms to include a cooperative project on the integration of new semiconductor I/O ICs into selected Intel PC motherboard designs through the end of 1997. The two companies also agreed to cooperate on a family of proprietary low-pin-count I/O devices for future applications. Under the agreements, Intel is said to have purchased just under a 10 percent interest in SMC, buying approximately 1,540,000 shares of SMC's common stock directly from the company at a price of $9.50 per share. Intel also received a warrant to purchase an additional 10 percent interest in SMC and certain anti-dilutive rights.

SMC is a supplier of MOS/VLSI circuits and network products for the PC industry.