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Technology Stocks : Semi Equipment Analysis

SOXX 312.76

+1.1%

Dec 8 4:00 PM EST

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To: Cary Salsberg who wrote (10326)	6/26/2003 8:16:44 AM
From: Alastair McIntosh	of 95536

CSFB sees some strength in PC end markets; IT Hardware - Data Confirms End Market Recovery • Two and half months ago when we upgraded our IT Hardware industry rating to Overweight there was only marginal evidence of an end-market recovery. Since then, there have been several data points that confirm a measurable improvement in end demand in several key segments of the IT Hardware industry. • Last night, NPD Intelect released its US retail PC sales data for the month of May and for the second month in a row PC shipments exhibited positive unit growth. Total units in May grew 17% y/y, the highest growth rate since August 2000. As expected, notebook sales drove most of the strength, growing a whopping 57% y/y, while desktop growth was flat. Incidentally, the last time desktop shipments increased y/y was in January of 2001. It is important to note that NPD only represents a small portion of the overall market, but it has proven a good indicator of general market trends. • This retail information is consistent with several other datapoints recently publicized: • 1) CC ($8-NR) and BBY ($43-NR) both experienced strong demand for notebook PCs in their May quarters due to Wi-Fi adoption. • 2) INTC ($20-NR) and MU ($12-NR) noted PC sales for Q2 would come in at the high end of seasonal patterns. • 3) Data released yesterday from the US Commerce department indicates that orders for "Computers and Related Products", which also includes storage and peripherals, posted +7% YTD increase (through May) compared to -18% growth a year ago at this time. • 4) The SARs scare is ebbing in China and motherboard demand volumes have rebounded sharply in recent weeks. • 5) Graphics chip maker ATI (ATYT-$10-NR) exceeded current quarter expectations and pointed to better growth in future quarters. • We remain comfortable with our 2003 PC unit estimate of +7% and our -6%q/q for 2Q03, which is traditionally the slowest quarter in the year. Based on a growing number of positive sell through data points we are more likely to raise rather than lower our 2003 PC unit growth forecast.

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