Answers About Diversified Markets

Historically, the majority of Alliance's business has occurred in the personal computer marketplace, which includes desktop and mobile PCs. Alliance's SRAMs are principally employed as caches and buffers between the computer's microprocessor (CPU) and main memory. Alliance's fast DRAMs provide main memory storage for all computer operations, while Flash memory products store basic input/output system (BIOS) software for the PC's CPU. And Alliance's multimedia user interface (MMUI) accelerators are used on PC motherboards, as well as on multimedia add-in cards that provide higher graphics performance for personal computers.

During the latter half of fiscal 1996, Alliance placed an increasing emphasis on sales to markets outside of the PC arena. These include meeting the high-performance memory requirements of network routers and switches, which use a range of Alliance products. In the telecommunications market, meanwhile, a variety of switching, central office PBX and modem applications need the high-performance memory products that Alliance provides. And instrumentation such as logic analyzers, oscilloscopes and lab and test equipment also use a variety of SRAM, DRAM and Flash memory products that Alliance produces.

Similarly, the data communications, networking and telecommunications markets are facing demands for continually higher information throughput. High-performance memory products like those manufactured by Alliance are necessary in these environments to boost overall system performance and keep pace with the ever-increasing speeds provided by today's data communications standards and technology.

The majority of Alliance's revenues historically have been derived from the sale of fast SRAMs to board manufacturers and system suppliers in the PC marketplace. During the last two years in particular, these suppliers aggressively purchased SRAMS for ongoing usage and to build buffer inventory to prepare for increasing demand and fluctuations in supply. Alliance currently believes that many PC manufacturers saw a decrease in SRAM demand leading up to the 1995 Christmas season and began to use existing inventory and reduce their SRAM orders moving forward. This resulted in a lack of demand that helped drive SRAM prices down precipitously, contributing to a soft market for SRAM products that still exists today.

In response to these conditions, Alliance has devoted a great deal of energy focusing on opportunities beyond the personal computer market. In addition, we've diversified our product offerings into three additional areas-DRAMs, Flash memory products and multimedia accelerators-to decrease our dependence on the sale of SRAMs and to fuel growth in the future.