17th > July > 2001 Archive

Corel buys Micrografx

Corel is to acquire Micrografx in a stock swap valued at $32 million. Best known for its flow charting software Designer - which has been around since Windows 2.x days - Micrografx also offers services and business process consulting. Microsoft acquired rival Visio in September 1999, and has been promoting it heavily as a component of Office XP, so for Micrografx the er, flow charting was on the wall. It's roughly equivalent to a year's income for Micrografx. A merger of these two Windows survivors - they were writing for the DOS shell in the 1980s, when almost everyone else was following the advice of Microsoft and IBM and writing for OS/2 - has the melancholy air of a reunion of two ancient war veterans. "All our chums have been shot, blown up or died of old age," the companies said in a joint press statement yesterday. "We might as well move in together, share the teabags, and keep each other company." Of course they didn't really say that. Corel and Micrografx actually talked about synergies and about taking process management onto new wireless platforms, but they might as well have. The deal is subject to approval, and Corel's $126 million cash pile remains intact, unless CORL stock falls below $2.90 in which case Corel makes up the difference in cash. No doubt with the failed Borland acquisition in mind, that part of the statement Corel issued yesterday is in bold type. ®
Andrew Orlowski, 17 Jul 2001

Hynix sources confirm DRAM production cuts

Memory maker Hynix will start reducing its DRAM output at the end of this month in a desperate bid to curb the crashing price of memory chips. So says DigiTimes, citing "top-level sources". The company has been rumoured to be considering production cuts for some weeks now. At this stage it's not known whether jobs will be eliminated at the company's memory plants - it has 13 of them - or which production lines will be turned off, but the betting has to be on the older facilities. The news follows a report from Korean analyst Meritz Securities that the DRAM market is going to get a lot worse before it gets better. Meritz also believes that the major memory producers will soon begin to cut back on production in a bid to prevent the downward spiral of DRAM prices. It's not known how much production capacity Hynix will cut, but DigiTimes cites "industry observers" who put the figure at 20 per cent of the company's monthly output. ® Related Story DRAM market to get worse before it gets better Related Link DigiTimes: Hynix to cut DRAM production at the end of July
Tony Smith, 17 Jul 2001

Chip-making kit spend slumps

World+dog is cutting its spending on chip-making equipment. Taiwanese semiconductor companies, for example, will this year spend just over half of what they did in 2000. TSMC has temporarily halted building work on a second 300mm wafer fab, Taiwan's Economic Times reports. UMC has decided not to build a 300mm wafer plant, either. Marconix has delayed a NT$30 billion investment programme by two years. The problem is by no means restricted to Taiwan. Market watcher Gartner Dataquest reckons Asia Pacific companies will cut spending by 33 per cent, Japan by 24 per cent, North America by 22 per cent and Europe by 17 per cent. Globally, sales of chip-making kit will fall 35 per cent on last year's figure of $47.7 billion, the Semiconductor Equipment and Materials International (SEMI) has reported based on a survey of 71 equipment makers. That broadly matches Gartner Dataquest's numbers, which put spending on equipment at $27.9 billion this year, down 30 per cent on last year's $39.9 billion. Worldwide semiconductor capital spending is projected to be $47.3 billion in 2001, a fall of 26 per cent on last year. Fab construction delays like those initiated by the Taiwanese chip makers will ensure any recovery for equipment makers will take place later rather than sooner. SEMI's survey suggests chip makers feel the market won't bottom out until the end of the year at the earliest, and probably not well into 2002. SEMI predicts next year will see a modest, 11.6 per cent increase in sales, from this year's $31 billion to $34.6 billion, followed by 22.5 per cent growth in 2002, to $42.4 billion. Clearly, it's going to be some time before sales rise to 2000 levels. ®
Tony Smith, 17 Jul 2001

AMD to buy Fujitsu Flash plant?

AMD and Fujitsu are negotiating the sale of the Japanese chip maker's Oregon-based Flash memory fab, Japanese paper Nihon Keizai has reported. The plant - Fujitsu's only facility outside Japan, according to Reuters - supplies Flash chips to a Fujitsu-AMD joint venture. With the collapse in global Flash demand, the product of the slump in sales of networking hardware and cellphones, Fujitsu apparently wants rid of the plant, the paper claims. Fujitsu has already said it plans to temporarily suspend production at its Japanese Flash facilities in August and September. For its part, AMD hasn't been immune to the downturn in the Flash market. The sales slump was largely responsible for a 16 per cent fall in revenue in the chip maker's most recently completed fiscal quarter. That said, it may not want to see the plant closed, and its discussions with Fujitsu may well centre on its acquisition of the plant. Other options include the sale of the facility to a third party, or its closure. ® Related Stories AMD Q2 sales fall 16% AMD makes up with Alcatel AMD sues Alcatel over Flash cash
Tony Smith, 17 Jul 2001

The Tory leadership election on the Net

Updated with resultsUpdated with results Today, as you probably know, is the third round of voting for the Conservative Party's leadership election. By roughly 6pm this evening, the choice should be whittled down to just two by MPs and then the Conservative party at large will get to decide who will lead them to failure in the next general election. Update At 5.32pm, the results have come in thus. Ken Clarke wins with 59 votes, Duncan Smith second with 54 and Portillo is out the race with one less, 53. We also got a press release complaining that none of the Web sites (see below) are any good for blind people. Duncan Smith's is the worst apparently (no alt text)end update The three men still up for the top job are: Ken Clarke - Former Trade secretary, Health secretary, Education secretary, Home secretary and Chancellor Michael Portillo - Former Minister at Treasury, Employment, Defence and shadow Chancellor Iain Duncan Smith - Shadow social secretary, defence secretary and member of several select committees And yes, all three of them have election Web sites. Thus follows a review of each man and his Web site: Ken Clarke Heavyweight politician, bags of experience, taste for ale and whisky, several chins. Ken Clarke is portrayed by the others as a has-been. Has 44 votes so far. Currently bookies' second favourite. Main stumbling point is his enthusiasm for Europe and the euro - the two topics that have torn the Tory party to pieces in the last ten years. As for the Web site at www.kennethclarke.net, it's a neat, tidy and professional piece of design. There is a very short message from Ken and a flattering photo of him, but nothing else apart from press releases, news clippings and a biography. 5/10 Michael Portillo Charismatic politician, dangerous, taste for snappy clothes and blow-dry haircuts. Michael Portillo is portrayed by the others as a back-stabber, ruthless politician and suspect character. Admitting to homosexual experiences when younger hasn't helped enamour him to Conservative grassroots. Nor did revelations that he actively attacked William Hague's election campaign. Has 50 votes at the moment. Main stumbling point is that people don't trust him - well, don't trust him more than other politicians. His Web site at www.electportillo.com is another professional job. However, everything is done in a shade of blue, making it looked bleached. Also, in the search for simplicity, it runs as a long list down the page which is a little irritating. Bog standard fare, including articles, news, biog and contact details. Also 5/10 Iain Duncan Smith Principled politician, admired, ethical but largely unknown. Iain Duncan Smith is portrayed by the others as lacking in experience and too right-wing. He has 49 votes at the moment. Mr Smith is now the bookies' favourite. Benefiting from the fact that few really know him and so have no reason to hate him. Main problem is his strong stance on Europe and the euro - he's completely against it. Major problem is that if Tony Blair calls a referendum on the euro and the country passes it, if Mr Smith has made it as leader of the Tories, he would have to resign on principle, putting the party back in the same spot it is now. His Web site at www.voteids.com, is the best of the lot however. Up-to-date, simple and professional but effective. Good use made of graphics and very easy to navigate. Also contains more information that the other two. 7/10 And so there you have it. There are 24 Conservative MPs that have so far refused to say which way they are voting and it is this small group that can push a politician one way or the other. We would love to hear the deals being struck at Westminster today. ®
Kieren McCarthy, 17 Jul 2001

Alcatel slashes 300 UK jobs

Alcatel is slashing ten per cent of its UK workforce - about 300 jobs. The move is to "address the changing dynamics of the telecommunications market". The company is offering voluntary redundancies, but expects it'll have to can workers who want to stay. Earlier in July Alcatel announced plans to cut 2,500 jobs in the US and consolidate facilities in order to cope with the continuing slowdown in spending by service providers. The UK job cuts will be spread across offices in Banbury, Newport, Maidenhead, the Isle of Dogs, and Greenwich. ® Related Story Alcatel to pink-slip 2500 US workers
Robert Blincoe, 17 Jul 2001

3D Labs optimises Wildcat code for Athlon MP

Graphics chip maker 3D Labs has tweaked the driver behind its Wildcat graphics processor to improve performance on AMD Athlon MP-based systems. 3D Labs' new driver supports all four cards in the Wildcat range. It takes advantage of the Athlon's 3D Now! SSE-compatible instruction set and Smart MP, AMD's multi-processing chip-to-chip communications system. AMD is not surprisingly pleased by the move, which it hopes will boost its chip's appeal to designers of graphics workstations. After all, it's not exactly over-burdened with companies keen to buy the Athlon MP. Not that AMD necessarily expected the chip to be an instant hit, but it needs support from workstation-oriented companies like 3D Labs if it's to persuade the world that its high-end chips are viable alternatives to established Intel and Risc parts. The Windows 2000 Wildcat driver are expected to ship later this month, 3D Labs said. A Windows NT version will follow by the end of the quarter. ® Related Stories AMD grabs 50% of top vendors' consumer desktops AMD updates roadmap, delays desktop Athlon 4 AMD to ship 1.4GHz Athlon MP by August AMD guns for 10% of low-end server market AMD unveils MP Athlon - but no big-name partners
Tony Smith, 17 Jul 2001

Oracle aided Marconi collapse

Last week, the once powerful Marconi (formerly GEC) suffered a humiliating share collapse following an unexpected profit warning. The company's operating profit has been jumping each year from 1997 as CEO Lord Simpson turned it from a large lumbering giant into a lean, mean telecoms machine. However, on 5 July - having suspended its shares for a whole day (most unusual) - it told the City that profits would be down 50 per cent. Furious investors frantically sold their shares, causing the share price to drop 54 per cent in one day. The ensuing fall-out saw shares drop even further, the deputy CEO and soon-to-be CEO John Mayo removed and Lord Simpson's credibility smashed. Tomorrow, investors and shareholders will have their first meeting with the Marconi board and they will demand answers. The board will tell them that the big drop in demand that has hit all telecoms equipment companies surprised the company and resulted in the profit warning. Investors will question how on earth the board didn't see it coming - after all both Lord Simpson and John Mayo are accountants by profession. (They will also be livid at the board's attempts to award itself bonuses it doesn't deserve by lowering the share price at which they kick in - from a hefty £16 a share to just £4 a share. The share price rests at just over £1 at the moment.) And that is the multi-billion dollar question: how and why didn't the board see that profits were slumping? It's fair to assume they didn't, or they would have made the information known long before 5 July. Well, thanks to people within Marconi, we can tell you precisely what went wrong and why. It all comes down to the company's many acquisitions, a lack of effort at board level to find out what was going on and the failure of Oracle reporting software to keep up with the change. Soon after Lord Simpson took charge, he embarked on a huge selling and acquiring spree. In March 1999, he acquired Reltec for $2.1 billion. In April 1999, Fore Systems for $4.5 billion (in cash). At the same time, he sold GEC's defence business to BAe for around £6 billion. Then a further three cash buys that year for around £160 million. October saw the company renamed Marconi. In 2000, a further six purchases were made, totalling £265 million. Only in October did Marconi list on Nasdaq so it no longer had to pay cash for US companies. It also sold its retail/food arm for £102.5 million and its half share in a Russian phone network for $60 million. Thus, entering the year 2001, with the Internet boom already behind it (but the board unaware), Marconi had no fewer than 11 new companies to keep track of. On top of the other companies it already owned. The board eventually (too late) recognised the fact that consolidating financial details from all these companies was hugely problematic. And so in April 2001 (one month before its annual financial results), it announced a restructure, overseen by John Mayo. Part of this consisted of "the elimination of duplicate information systems through the implementation of a single company-wide systems platform". The $250 million deal with Oracle for its E-Business Suite was announced with its financial results. It was to "provide an integrated transaction system, business intelligence and Internet platform on a single instance" and be implemented across the entire company. The new CFO Steve Hare said: "Oracle was selected because of the vision and understanding of our integrated business requirements, combined with the ability to implement very fast." The system would be up and running for the majority of its businesses by March 2002, the board informed employees. However, the roll-out quickly got behind schedule and the most recent estimates at the company are than only half of the companies will be on the new system by the March 2002 deadline. The system is to be run on ASP lines - something that concerns staff since it remains a largely unproven technology. At the time the Oracle deal was being thrashed out, the ASP model was being touted as the future, however since then its popularity has rapidly declined and companies have quickly shifted into different areas. On top of this, Oracle has no real experience in this field. It is also, we understand, planning to use its Alpha processor servers to run the system on - and Alpha will be swimming with the fishes in two years time following Compaq's deal with Intel. While this continued delay will continue to cause Marconi grave problems in the future, the failure to introduce such a scheme earlier was the main contributing factor to the company's profit warning this month. Unknown to the Marconi board, the telecoms companies it had invested heavily in were seeing a slump in demand with knock-on effects on the entire company. Whether complacency over the new system played a part in the board remaining blind remains unsure, but there was clearly an enormous failure on its part to find out what was going on in its subsidiaries. For this, John Mayo paid the price and Lord Simpson may still have to. ®
Kieren McCarthy, 17 Jul 2001