IDT's MPU roadmap

Electronic News, Feb 9, 1998 by Jim DeTar

Changing From A Memory Producer To Compete With The Microprocessor Giants

Santa Clara, Calif.--Integrated Device Technology has undergone profound changes over the past two years as the company has transitioned away from its previous mainstay synchronous RAM and communication IC business and, with the acquisition of x86-compatible microprocessor vendor Centaur, begun to move toward being a full-line microprocessor supplier.

Electronic News has learned that IDT will shortly unveil a new corporate strategy roadmap including a marketing and advertising campaign designed to clarify the company's position in the market. The problem is that IDT now has communications and glue logic chips, a full line of SRAMs, a MIPS RISC microprocessor (acquired under a MIPS license back in 1989) and the Centaur IDT Winchip. There appears to be confusion in the market about what direction the company wants to go.

Like many memory vendors, IDT was hit hard by the steep fall in prices and, also as other memory vendors, IDT began to diversify into other areas to avoid going down with the ship. Len Perham, IDT's president and CEO, was on the road last week talking with industry analysts about the changes that have taken place at IDT and about the imminent announcement of a new direction for the company. Dave Cte, hired nine months ago as VP of corporate marketing, in a separate interview, related how IDT hopes to continue its diversification strategy. In an interview from the road, Mr. Perham discussed the course IDT is charting for its future, saying that its new status as a vendor of x867-compatible chips will gain importance.

"The Winchip C6's going to become a more important product for us in 1998. With the growth in our 32--and 64-bit embedded control family, one of the fastest growing segments of our business--coupled with the ramp of the Winchip C6 in 1998--it's very likely that by the end of fiscal 1999, which starts at the end of April, processor sales will be the greatest segment of our products, and SRAM sales will drop below 25 percent of revenues." This is a dramatic change for IDT because as recently as two years ago, SRAMs accounted for about half of the company's revenues.

In addition to the memory market debacle, IDT has been under pressure because it has invested heavily in manufacturing technology, with a new fab just now coming on line in Hillsboro, Ore. Mr. Perham said that IDT is now in a position to offset some of that capital expenditure.

"With our traditional business we have started to offset the large fixed cost of the Oregon facility. Growth with the C6 allows us to dilute the fixed cost impact on each chip we ship. This will allow us to do three things: Increase the amount of money going to bottom line; our fixed costs are going down. Number two: our traditional business is doing well. Third and finally, we're just completely unable to meet the demand for the C6s.

"We will ship 100,000 this quarter. That will increase by 2-1/2 to three times in the June quarter," Mr. Perham said. Based on his calculations, the company could be shipping around a half-million C6 x86-compatible chips by this coming fall.

Battered By Prices

Mr. Perham said this is the start of a significant turnaround for the company, which has been battered by the price slide and heavy competition. "In fiscal 1995 and '96 we returned well over 20 percent pre-tax to shareholders. In '97, after a big drop in memory, we were investing heavily in product diversification. On January 7 of this year, we told shareholders we have basically taken a different position with respect to our shareholders.

"After two years of diversification we find ourselves with a strong product line and a strong foothold in a new product area. We have a product that serves an important application market and provides value to our customers. We are going to be able to expand into that area substantially. That is the Winchip C6.

"You can expect to see R&D costs come down, see more money flow to the bottom line, and see top line growth faster than the industry average. Our Clearlogic subsidiary, which has moved into the business of ASIC conversion--I'm not even taking that into account. We are very excited about our ability to pay back our shareholders."

IDT has made a number of executive changes in recent years as part of its diversification strategy. Among them, the company brought in Mr. Cte as VP of corporate marketing.

Mr. Cte was previously at ATM (asynchronous transfer mode) startup Zeitnet, which was purchased by Cabletron. Prior to that he spent nine years at Apple, and five years at Synoptics, two of IDT's primary customers, giving him a good knowledge of IDT's customer base.

"There are two different areas," said Mr. Cte. "One is the product segment. People who may have known IDT for a long time may have seen it as a memory company. Two to three years ago, more than 50 percent of our business was in commodity SRAM. For the last two to three years we've been trying to change the focus of the company."