Robbie Stephens Semi Conference: Day One's First Read of Year-End Numbers

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SAN FRANCISCO -- The gathering of some 1,200 mutual fund managers and 95 companies here at the two-day

Robertson Stephens

Semiconductor conference is kind of like a gathering of the

Optimists' Club

in part of a larger doomsday cult -- people are looking for good news in a world of semiconductor nightmares. The hallways of the sumptuous

Ritz-Carlton Hotel

are filled with people talking about Asia, Asia, Asia, as if she's the oldest girl in the

Brady Bunch

.

And, after one morning, it seems that the Asia news isn't any better (surely pleasing Jan), but, perhaps, just perhaps, there is good news coming for PC sales.

Laptops on the Rise

NeoMagic

(NMGC)

went public in March of 1997 with

Dell

(DELL) - Get Report

as its only customer. "Not," says Chief Financial Officer Merle McClendon, "a bad customer to have."

But, since then, NeoMagic -- the Santa Clara, Calif.-based multimedia laptops chip maker -- has expanded its customer base to every big maker of PC laptops. Dell now represents less than 20% of NeoMagic's growing revenue model (though NeoMagic remains Dell's sole supplier of laptop multimedia chips).

In a crowded and noisy presentation room, McClendon explained NeoMagic's raison d'etre: the notion that multimedia machines are not on the desktop, but in the briefcase. "Most of us don't do presentations from our desktop," said McClendon, one of the few women who present at this type of conference. "So the multimedia tool of choice is the laptop."

That unassailable logic quieted the chit-chat from the back of the room, and the 50 or so fund managers in the room started paying attention. McClendon demonstrated her company's chip by playing a "Size Matters" video clip from

Godzilla

. The 30-second spot, with clear video and audio, was run on a three-pound

Sony Vaio 505

.

NeoMagic is on a January 31 fiscal year, so it is one of the few companies presenting here yet to report second-quarter earnings. Earnings are due Aug. 12, and the

First Call

consensus is 26 cents per share.

After the session, McClendon offered some guidance for those looking for an end to soft PC sales. And the end, says McClendon, was here. "I can't tell you about overall PC sales because we only sell into the mobile space," she says. "But I can tell you that the mobile space is growing very strongly. The first- and second-quarter demand was weaker, but we see it picking up in the third and fourth quarters."

You Gotta Get Up Early in the Morning...

Those at the conference who got to Salon 1 early enough to have to wait for the welcome speech by Robbie Stevens technology head

Brian Bean

at 7:45 a.m. had to listen to Muzak that was a little too loud and way too upbeat for that hour. And that only to hear Bean inform the sparse crowd that the semiconductor industry, measured by the

Philadelphia Semiconductor Index

(SOX) had dropped by 18% over the past year while the

Dow

,

S&P 500

and

Nasdaq

had surged. Who would have known? What's his expert opinion on the meaning of this?

He says its time to buy. Back to the Muzak.

Isn't It Ironic? Graphics Chips Look Bad in Third and Fourth Quarters

If you're looking for a turnaround in a broken chip company, don't look for it from

3DLabs

(TDDDF)

. The stock of the maker of graphics accelerator chips has been beaten badly in the last two quarters, and President and CEO Osman Kent says that Asia isn't through putting the hurt on. "Nineteen ninety-eight," he says, "will not be good.

"Demand for our Permedia chip dried up early this year," says Kent. "There was oversupply of 3-D chips, in Taiwan there was a certain amount of dumping and, in general, the situation continues unabated today. We expect these negative trends to continue until at least the fourth quarter, and we expect some industry consolidation to continue."

3DLabs is hoping to use this downturn to lock in the high-end 3-D chip market in both the high-end OEM market (Windows NT workstation users who do graphics like those seen in

Titanic

) and add-on boards used by "enthusiasts" (i.e., video-game geeks who buy graphic accelerators from

Creative Technologies

(CREAF)

). "3-D graphics chips today are the most complex in a PC today," says Kent. "The chips we will soon ship will soon be larger, in terms of number of transistors, than CPUs themselves."

That said, Kent doesn't expect to be selling

too

many over the rest of the year. " The graphics sector is still in oversupply," Kent told

TheStreet.com

after the presentation. "The optimists in the industry look for a turn-up in the fourth quarter, but I'm on the cautious side."

More, More Moore

Why is our friend Nick Moore, who now manages a $1 billion tech stock portfolio for Oakland-based

Jurika & Voyles

, the "oft-quoted Nick Moore?"

'Cause he's a good quote!

Vintage Nick in the hallways this morning: "Beware of companies that have the target price in the name," he says. "Because 3DLabs is going to $3.

Level One

(LEVL) - Get Report

is going to $1.

3Dfx

(TDFX)

... you get the idea."

So stay out of the way if an outfit named

ZeroLogic

comes public.

Says TI, Don't Mess with Texas

Rich Templeton, executive vice president of Dallas-based

Texas Instruments

(TXN) - Get Report

, gave one of the lone cautionary outlooks in a conference which has been, thus far, full of rousing enthusiasm for future market growth. The company will end 1998 down overall, but he remained positive about the future.

The company is well-positioned in digital-signal processing, which he considers the single most important market. TI's market share in DSP is bigger than those of the next two players combined --

Lucent

(LU)

and

Motorola

(MOT)

, Templeton said.

DSP competition doesn't so much worry Templeton as it amazes him. "The only company that hasn't announced entry into the market is

Anheuser Busch

(BUD) - Get Report

BUD, and I'm still waiting for that," he said.

So how has the company positioned itself? By making sure college students are fluent in TI DSP before they graduate and then grabbing them when they do. And by linking with every important startup venture in the field. "It's about having the best design engineers and retaining them," he said.

TI is tightening its grip on analog technology as well. "We want maniacal focus," he said. The company has been and continues to shoot for 20% revenue growth and 20% operations profits over time.

Message to Shorts: MCHP Dares You

Steve Sanghi

, president and chief executive officer of

Microchip Technology

(MCHP) - Get Report

of Chandler, Ariz., threw down the gauntlet to short-sellers. "Short-sellers have tried to create fear and uncertainty about Microchip's future," said the head of the company that makes microcontrollers -- commonly known as embedded intelligence.

Sanghi was anything but uncertain. He had slides comparing the company's niche markets to a tidal wave, an iceberg and a pyramid. Except for two noticeable glitches: a downslide in 1996 caused by an inventory glut and a downslide this year he blamed on Asia -- earnings per share had risen steadily from 30 cents in fiscal 1993 to $1.21 in fiscal 1998. The company was the 20th-biggest supplier of microcontrollers in 1990; now it is second to Motorola. And he's convinced Microchip's future designs will topple Motorola to make the company No. 1.

So, what does he say to the short-sellers? "My message is 'Go ahead, make my day.'" "Only after that 'Go get a life.'"

The More, the Better

The locker-room talk at the conference, at least in the early hours, wasn't about the parties attended the night before or the amount each fund manager had to drink. It was how many one-on-ones -- chances to talk to company reps without the press or competing investment managers around -- each was able to set up.