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Compaq’s struggle continues

Compaq Computer’s financial struggles continued in the fourth quarter of 1999
as the computer company saw profits plunge 56 per cent on a 4 per cent drop in

sales. Compaq earned $332 million, down from $758 million a year earlier. Sales,

hurt by slower business computer sales were down to $10.48 billion from $10.86

billion. For all of 1999, Compaq earned $569 million, compared with a loss of

$2.74 billion in 1998. The 1998 figure reflects costs associated with the

acquisition of Digital Equipment. Sales totaled $38.53 billion, up 19 per cent

from $31.17 billion in 1998.


Compaq’s new president and chief executive officer Michael Capellas

insisted the company is recovering and pointed to stronger sales of consumer

PCs. "I'm very pleased with the progress we've made. During the second half

of this year we took aggressive action to return Compaq to profitable growth,

and fourth quarter results reflect our initial success where it matters most -

in the marketplace." Capellas added that the company had a record $2

billion in consumer computing sales, up 24 percent from the year-ago period.

Revenue from Internet access and traffic bolstered those results. Analysts

said Compaq’s struggle is far from over. While still the largest PC vendor,

the company appears to be losing the battle with Dell Computer and its

aggressive direct sales business model. Dell already has overtaken Compaq as

America’s largest PC maker and is heading to overtake Compaq in the global

market as early as this year. "I think their time has come and gone,"

said analyst Ashok Kumar, adding that one of the only attractive things about

Compaq today is its relatively low stock price.

Intel plans $2-billion 300mm fab in Arizona

Intel said it was planning to spend $2 billion to build its first 12-inch (300
mm) chip plant. The facility will be built at the Intel campus in Chandler,

Arizona. Intel hopes to produce up to three time more processors on a single 300

mm wafer compared to the industry standard 200 mm platters. Over all costs of

making each chip will also be cut by a third.


More losses at Cadence

San Jose-based chip design software market leader Cadence Design Systems
continues to struggle as the company lost $22.5 million in the fourth quarter

while sales declined 29 per cent to $268 million. It was the third straight

money-losing quarter for Cadence, whose financial results have been impacted

heavily from shifting to a new way of recording sales. In the past, the company

recorded all of the expected revenue from a long-term contract up front. Now, it

is counting them as the revenues are actually realized from those contract each

year. So far, 38 per cent of revenues are generated under the new accounting

method. "Cadence's transition is right on track, and customer response to

our new license model has been very positive,'' said Cadence Chief Executive Ray


Analysts said the prospects for the company to recover appear bright as its

customers base, the global semiconductor industry is at the start of a new

period of strong growth. And, the shift to 0.18 micron and below will bode well

for Cadence’s sales.

Cypress has record sales

SRAM maker Cypress Semiconductor of San Jose achieved record results in its
fourth quarter earnings as strong demand from the data communications and

telecommunications sectors fueled sales and earnings. Cypress profits rose to

$47.5 million, compared with a loss of $1.7 million a year ago. Sales surged to

a record $207.9 million, up 43 percent from $145.6 million a year ago.


Cypress CEO T.J. Rodgers said the company's year-over-year revenue growth as

close to double the growth rate of the semiconductor industry in 1999. "The

industry is growing at 20 per cent and we want to double that. Our target this

year is to break the billion dollar mark (in revenues)." For all of 1999,

Cypress had sales of $705.5 million, up from $554.9 million in 1998 revenues.