STOCKREPORTS		 Chips and Technologies, Inc. Nasdaq Symbol CHPS
In S&P SmallCap 600
19-JUL-97 Industry:
Electronics (Semiconductors)		 Summary: This company derives a majority of its revenues from graphic controller products for personal computers. It also produces core logic and input/output products.

Recent Price 13.69
52 Wk Range 23.88 - 8.38		 Yield Nil
12-Mo. P/E 8.7

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
3-
Fair Value
11.90
Risk
HIGH
Earn/Div Rank
B-
Technical Evaluation:
BULLISH since 04/97
Rel. Strength Rank (1 Lowest - 99 Highest)
94
Insider Activity
NA

Overview 30-JUN-97

While we continue to believe that CHPS should benefit from its strong market position in the portable computer segment, we are cautious about sales growth in the near term. In a conference call with investors after its FY 97 (Jun.) third-quarter earnings report, the company said it had witnessed a transition of its customers to 3D functionality and adoption of embedded memory applications before such offerings are available from CHPS. The company's 3D offering will not be available until later this year, and its embedded memory technology will commence sampling this summer. The lost design wins in the interim will affect revenues in the short term. However, with strength forecast for the portables market, and CHPS's leading market share position, we believe the company's longer-term position remains favorable. CHPS is well positioned with its new HiQVideo family of 64-bit video/graphics controllers, and it has achieved design wins with notebook market share leader Toshiba, as well as on notebooks from Apple, NEC and Gateway. Our FY 97 EPS estimate is $1.30.

Valuation 30-JUN-97

We downgraded the shares following CHPS's FY 97 third-quarter earnings report. The impact of the design losses is hard to quantify, and the low visibility of revenue growth in the near term adds risk to owning the shares. However, we also believe CHPS has a strong position as a provider of graphics accelerators to the portable market and, with the growth outlook for this market, the shares at current levels are attractive enough to hold for those with investment horizons of 12 months and greater.

Key Stock Statistics

S&P EPS Est. 1998 0.80
P/E on S&P Est. 1998 17.1
Dividend Rate/Share Nil
Shs. outstg. (M) 22.0
Avg. daily vol. (M) 0.612
Tang. Bk. Value/Share 5.43
Beta 1.51
Shareholders 1,000
Market cap. (B) $0.300
Inst. holdings 23%
Value of $10,000 invested 5 years ago:$ 14,757

Fiscal Year Ending Jun. 30

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 44.49 37.22 20.37 21.17 26.30 33.00
Q2 48.23 38.26 23.28 22.44 28.40 43.70
Q3 37.76 36.51 27.23 14.44 21.61 31.30
Q4 37.86 38.80 33.85 15.39 21.53 33.10
Year 168.3 150.8 104.7 73.44 97.87 141.1

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.42 0.20 0.07 0.02 -0.63 -0.73
Q2 0.42 0.26 0.13 0.04 -1.67 -2.06
Q3 0.35 0.45 0.11 0.01 -0.26 -0.70
Q4 0.38 0.27 0.18 0.09 -0.59 -0.58
Year 1.58 1.18 0.50 0.16 -3.13 -4.00

Dividend Data: No cash dividends have been paid.

Business Summary 30-JUN-97

Chips and Technologies, Inc.'s highly integrated silicon and software solutions provide enhanced graphics, full motion video, and other advanced display capabilities for notebook and desktop made by major personal computer (PC) makers Dell, Hewlett Packard, IBM, NEC, Apple, Digital Equipment and Toshiba.

Claiming a 45% market share for graphics and video controllers for portable computers, CHPS recently announced that number one notebook computer manufacturer Toshiba had selected its new HiQVideo graphics accelerator for Toshiba's first notebook computers to support the new Intel MMX multimedia technology. By using a design methodology based on implementing functions in a modular fashion -- referred to as Techblock -- CHPS can more easily customize solutions for its customers.

CHPS introduced the first VGA controller for flat panel displays, and led the industry in establishing the "fabless" manufacturing strategy--meaning it subcontracts out manufacturing. The company's VHDL (Very High Definition Language) is a design methodology that CHPS developed to get next generation solutions to market quickly.

While the company is focused on bringing new technologies to market quickly, a market transition to 3D recently occurred before CHPS had product available. This resulted in some design losses. CHPS is part of a joint development effort with Lockheed Martin's Real 3D to provide integrated 2D, 3D and video graphics controllers for PC and emerging Internet markets. Real 3D has entered into agreements with Intel Corp. to co-develop real-time 3D graphics chip technology for consumer PCs. CHPS's 3D offering is expected to be available in late 1997.

The lost design wins in the interim will affect revenues in the short term. However, CHPS is still strongly positioned in the portables market, which is forecast to have growth in excess of that for desktops (somewhere near 25%). In addition, CHPS's design wins with its new HiQVideo family of 64-bit video/graphics controllers from notebook makers Toshiba, Apple, NEC and Gateway also bode well for the company.

CHPS has multiyear capacity agreements with Korea-based Samsung Semiconductor, Inc., Taiwan Semiconductor Manufacturing Co. and Singapore-based Chartered Semiconductor Manufacturing.

Capitalization

Long Term Obligations: $959,000 (3/97).

Per Share Data ($)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Tangible Bk. Val. NA 4.04 3.33 1.56 1.19 4.62 8.51 9.31 7.30 4.79
Cash Flow NA 1.30 0.60 0.37 -2.59 -3.15 0.18 2.49 2.54 1.68
Earnings 1.58 1.18 0.50 0.16 -3.13 -4.00 -0.71 1.88 2.23 1.54
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Prices - High 22 3/8 26 1/2 15 7/8 7 5/8 6 7/8 14 1/8 13 1/2 23 1/2 26 1/4 21 1/4
- Low 7 7/8 8 6 1/4 3 5/8 2 3/4 3 1/4 6 1/2 5 1/4 13 1/4 10 3/4
P/E Ratio - High 14 22 32 47 NM NM NM 13 12 14
- Low 5 7 12 23 NM NM NM 3 6 7

Income Statement Analysis (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Revs. NA 151 105 73.0 98.0 141 225 293 218 141
Oper. Inc. NA 22.0 11.0 2.0 -20.8 -43.7 -7.1 49.9 52.8 36.0
Depr. NA 2.7 2.7 3.4 8.6 12.2 12.0 9.4 4.5 2.1
Int. Exp. NA NA NA NA 1.6 1.5 1.4 1.1 0.6 0.5
Pretax Inc. NA 28.6 10.3 0.7 -49.1 -83.8 -16.5 43.8 51.7 36.0
Eff. Tax Rate NA 10% 9.30% NM NM NM NM 33% 36% 39%
Net Inc. NA 25.8 9.4 2.7 -49.1 -57.4 -9.6 29.3 33.0 22.1

Balance Sheet & Other Fin. Data (Million $)
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
Cash NA 24.0 22.4 22.5 30.3 14.2 37.6 72.3 59.3 47.5
Curr. Assets NA 84.3 74.9 43.0 50.0 88.0 116 163 121 86.0
Total Assets NA 108 85.8 55.0 65.0 121 159 202 141 95.0
Curr. Liab. NA 23.9 18.3 19.4 36.2 42.7 37.2 59.0 29.6 25.1
LT Debt NA 0.8 NM 8.0 8.9 3.8 6.8 8.6 6.2 2.7
Common Eqty. NA 83.4 65.7 26.0 19.0 72.0 114 134 105 67.0
Total Cap. NA 84.2 65.7 34.0 29.0 76.0 121 143 112 69.0
Cap. Exp. NA 3.3 3.4 1.7 0.7 2.5 8.6 13.5 12.3 6.6
Cash Flow NA 28.4 12.1 6.1 -40.5 -45.2 2.4 38.7 37.5 24.2

Curr. Ratio NA 3.5 4.1 2.2 1.4 2.1 3.1 2.8 4.1 3.4
% LT Debt of Cap. NA 1.0 NM 23.6 31.2 5.1 5.6 6.0 5.5 3.8
% Net Inc.of Revs. NA 17.1 9.0 3.7 NM NM NM 10.0 15.2 15.6
% Ret. on Assets NA 26.6 11.0 4.5 NM NM NM 17.1 27.6 29.7
% Ret. on Equity NA 34.6 20.4 11.8 NM NM NM 24.5 37.9 46.6

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--3050 Zanker Rd., San Jose, CA 95134. Tel--(408) 434-0600. Website--http://www.chips.com Pres & CEO--J. F. Stafford. CFO & Investor Contact--Tim R. Christoffersen. Dirs--G. P. Carter, H. A. Jarrat, J. F. Stafford, B. V. Vonderschmitt. Transfer Agent & Registrar--Bank of Boston, Palo Alto, CA. Incorporated--in California in 1984; reincorporated in Delaware in 1986. Empl-- 209. S&P Analyst: Megan Graham Hackett


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