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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: orkrious who wrote (237413)4/24/2003 2:22:03 PM
From: ild   of 436258
 
From JPM:
Major PC component supplier confirms PC inventory build
This morning during its March quarter conference call, ICST, the largest supplier of
clock chips to PCs, stated it was tempering its June quarter guidance for PC clock
chips due to excess inventory in the PC channel for both components and finished
goods that had built up in March. The company believes there is excess inventory in
both the whitebox and OEM markets and stated whitebox has slowed since March.
• ICST supplies clock chips or timing devices that are found on motherboards in PCs,
and we believe the company has approximately 60-70% share of the PC clock chip
market. The company stated they expect their PC clock chip business to decline
approximately 6-7% during the June quarter (below normal) if PC demand does not
pick up.
• As we stated in our notes on Intel and AMD last week, we believe there has been a
build up in PC inventories due to the weak PC sales and stronger-than-expected PC
component sales such as microprocessors. ICST also experienced better-thanexpected
sales from the PC channel during the March quarter.
• ICST stated that it believes inventory was built due to fears over supply chain
disruptions as a result of the Iraq war, which we postulated in our note. The company
also stated it has not seen any impact from SARS, so any incremental SARS impact
could be additionally negative. We would note AMD stated China was a big source
of growth during its March quarter.
• We believe other PC component companies could begin to report shortfalls and/or
lower guidance during the March quarter due to inventory corrections or potential
SARS impacts as China represents approximately 10% of PC demand. We believe
there is downside to our AMD and Intel revenue and EPS estimates in addition to
high valuation and reiterate our Underweight ratings.
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