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Semis Get Weak February Data Report; Estimates on Micron Too High?

"Microsoft Vista a Let Down for Hardware Companies"

No big sales

By Nick Farrell: Monday 02 April 2007, 07:02

PC MANUFACTURERS are not noticing much of a 'Vista' effect on sales.

The India Times says that despite hopes that the hardware requirements of Microsoft's new operating system would lead to a boost in sales of new computers, hardware makers are not seeing much of an upturn.

In fact many have oversupplies from building up their inventory to cope with the expected sales that never eventuated.

Acer’s president Gianfranco Lancim said that Vista had been no help and hardware maker's couldn't count on it.

Samsung has added that demand for DRAM computer memory chips from Vista hasn’t materialised as fast as it had predicted. Hwang Chang-gyu, semiconductor business president of Samsung Electronics expected the Vista impact on DRAM to appear by April. Now it was being delayed and will probably arrive with Godot in the second half of the year.

www.theinquirer.net/de...

More here:

"Hasta la Vista baby, say PC makers"

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Operator

Our next question comes from Munish Goyal.

Munish Goyal -

A couple of questions. It seems like you sound pretty positive about the PC-related DRAM supply/demand equation for the second half of the year. Yet, you are not investing or putting capital. Can you reconcile that for me? Why are you not putting capital for that?

Steve Appleton

Munish, it's not a matter of not putting capital. We're putting capital in, we're just not allocating it to produce that particular product. The answer is really pretty simple. Just look at the last seven years, there's only been one or two that have really been okay.

We're allocating the resources to products that we think are more differentiated and have a higher gross margin over a sustainable, longer period of time.

One thing that I think is worth noting is you can't go out and develop an image sensor customer or MCP customer where they have to design this product in months in advance or maybe a year in advance; finally get it to market and call them up and say sorry, we decided to make some PC DRAM instead. It just doesn’t work that way.

So we have commitments to make on these products as we build those businesses. As a result, we're going to allocate the resources to do that rather than just short-term change it.

Having said that, it's not that we won't benefit from an improving pricing environment for a product that goes into PCs because as Mike already stated, that's still a big part of our business and we will.

Our focus, as we’ve said now for several years, is to develop a more differentiated product. It's not to exit the PC space, it's to lessen our dependence on it and that's what we're trying to do.

Munish Goyal -

So, I guess the follow-up here is if as you said, out of the last seven years, there was one good year for PC-related DRAM, then why even be in this business or have such a large portion of your total business in PC-related DRAM? Why not shrink it to something more substantial? How do you think about that?

Steve Appleton

Well, we are shrinking it. As I said, it has continued to shrink for several years now. We're continuing on that path. So the other thing is, you say why make it at all? Well, we do have a lot of capacity in place and we do need scale, we need to continue to be cost competitive in our memory business in totality and that requires that you produce, I think, in all of these spaces.

It's not just as simple as cutting that all off and thinking that it solves all of the problems. It doesn't. You have to go through a transition and the intent and what we've been trying to achieve is go through that transition without damaging the Company in any particular quarter or 12-month period.

We're trying to keep a Company that's growing in the areas we want to grow, continues to make the use of efficiencies that we've learned and developed from the commodity DRAM business and keep that, by the way, knowledge base moving forward by participating in those markets. But leverage that into more differentiated product.