Intel Corp. strikes again. Just two weeks after National Semiconductor Corp. bailed out of the microprocessor business, IDT has put its microprocessor subsidiary, Centaur Technology Inc., up for sale. Both companies have been unable to compete against Intel, which has slashed prices and grown market share in recent quarters.
In addition, IDT president and chief executive Len Perham, who steered the company into the MPU business in 1995, has relinquished his post as president, and will step down as CEO at the end of the year.
Perham, who five years ago had been warned by colleagues to stay far away from the MPU business, denied that his resignation was tied to IDT's failure in the microprocessor market. He said, for instance, that company executives had been telling investors over the past two quarters that it was exploring opportunities for Centaur and its WinChip business.
"The cost of the R&D in that business, at the accelerated rate with which Intel started to bring out processors, was phenomenally high and very damaging to us," Perham said in an interview.
In its fiscal 1999, IDT posted a loss of $41.2 million on revenue of $540.2 million.
Whether the two announcements are a coincidence or related, the timing of Perham's resignation is still appropriate, said Justin Burgin, an analyst at Olde Discount Corp., Detroit. Back in the black in its latest quarter, Santa Clara, Calif.-based IDT is ready to make another transition, Burgin said. "A lot of things came together at once, where it was time to bring somebody else in," he said. "You didn't want Perham quitting at the toughest time for the company."
Jerry Taylor, executive vice president of IDT, has been named president and is expected to move into the CEO role at the end of the year. Taylor has been largely responsible for the chip maker's efforts to diversify into the communications market.In its first quarter of fiscal 2000, more than 70% of IDT's revenue was derived from the communications industry.
"The thing that was really forcing [the Centaur divestiture] to a head was that our communications products were being greeted with enormous approval and enthusiasm, and Centaur's a tremendous distraction inside the company," Perham said.
According to analyst A.A. LaFountain III of Needham & Co. Inc., New York, the struggling WinChip line reduced IDT's sequential revenue growth rate by 2% during its first fiscal 2000 quarter.
"Exiting the WinChip business removes a major drag on earnings and reinforces the company's focus on communications-oriented products and markets," LaFountain wrote in a report.
IDT expects to close a deal this quarter that will involve either selling or licensing its WinChip x86 microprocessor technology and certain assets of its Centaur design subsidiary.
In its financial report, IDT said revenue for its first fiscal quarter, ended June 27, rose 1.6% to $154 million, from $153 million in the same period last year.
Net income totaled $1.4 million, compared with a $50.9 million loss in the year-ago quarter.
Perham said revenue and bookings in IDT's core business-communications memory, SRAM, and logic products- "are the best we've seen in well over a year." Bookings of products acquired from Quality Semiconductor have exceeded expectations, he added.
In the MPU market, sales of IDT's WinChip processors fell "significantly" from the previous quarter, the vendor said.
While disappointed with the fate of Centaur, Perham said "the company is feeling good, product-wise."
Perham, who has been with IDT for 16 years, said he will remain on board to head Clear Logic Inc., another IDT subsidiary.
"I'm probably going to go from a board position to a very active role in managing that business and find out what's going on there and find out if that is in fact a company that's going to go public or a company that we ought to fold the technology back inside of IDT," he said.
Clear Logic, IDT's family of products that second source Altera Corp., is expected to break-even in the fourth calendar quarter of 1999.