Meanwhile, Merrill Lynch's Joe Osha lowered its rating on communications chips due to inventory concerns and belief that the group lacks a near-term catalyst. Merrill said its believes there is a high probability the inventory buildup will correct over the next two quarters.
"While many of the stocks in this group are already down 50 percent over the past several weeks, we believe that inventory concerns, coupled with telecom service provider capital spending concerns, will weigh on the group for the next one to two quarters," Osha said in a note to clients. Further, he notes that the group still sports the highest valuation in the chip business -- even after the recent decline.
Merrill lowered its intermediate-term ratings on Applied Micro Circuits (AMCC: news, msgs), Broadcom (BRCM: news, msgs), Vitesse Semi (VTSS: news, msgs), PMC-Sierra (PMCS: news, msgs) and TranSwitch (TXCC: news, msgs) to an "accumulate" from a "buy." Among those stocks, PMC fell 10 percent, Broadcom 9.8 percent and Applied Micro 9.8 percent. |
