Analysts More Cautious on Chip Sector Prospects
Wednesday September 4, 6:21 pm ET
By Duncan Martell
biz.yahoo.com
SAN FRANCISCO (Reuters) - Analysts are increasingly worried that semiconductor companies will have to ratchet down already cautious financial guidance as the industry tracks a slow and uneven recovery from a sharp downturn.
National Semiconductor Corp. (NYSE:NSM - News), a broad-based chip firm often seen as a useful gauge for the sector, on Wednesday added to the wary mood when it warned that current-quarter revenue would fall short of expectations.
While the company's fiscal first-quarter results met diminished expectations, it cautioned that early indications of consumer demand for the holiday season were not strong.
The next key event for the sector comes on Thursday when Intel Corp. (NasdaqNM:INTC - News), the world's largest chip maker, issues its mid-quarter business update.
Already, some analysts have cautioned they expect Intel, which gets about 80 percent of its revenue from the personal computer sector, to lower its third-quarter revenue guidance to the low end of the range it gave in July, saying it expected third-quarter revenue of $6.3 billion to $6.9 billion.
"We expect Intel to be cautious when it issues comments regarding the third quarter outlook on Thursday," Merrill Lynch analyst Joseph Osha wrote in a note to clients on Wednesday.
Osha also cut his 2002 earnings-per-share estimate for Intel to 51 cents from 55 cents and trimmed his 2003 estimate to 76 cents from 86 cents.
The third quarter for Intel is the most back-end loaded of all quarters, with typically 40 percent of its revenue coming in the last half of that quarter, analysts said. But this year, the company appears even more reliant on late-quarter demand.
"We think that this year, it is even more back-end loaded than usual due to the poor demand seen so far and the lack of future orders," wrote Dan Niles, an analyst at Lehman Brothers, in a note to clients.
SHARES MIXED, GLOBAL CHIP MAKERS CAUTIOUS
Intel shares closed up 25 cents at $16.11 on Nasdaq, after being slightly down earlier in the day.
The Philadelphia Semiconductor index (Philadelphia:^SOXX - News) was initially up marginally at the start of trading, then fell almost 2 percent later in the session, and closed up 1.9 percent.
Global chip makers meeting in Shanghai on Wednesday said 2003 could be tough on their profits as low corporate demand for computer technology amid global economic uncertainty keeps chip prices under pressure.
Executives from Infineon Technologies AG (XETRA:IFXGn.DE - News) and Micron Technology Inc. (NYSE:MU - News) told Reuters that shaky stock markets and U.S. threats of action against Iraq were convincing firms to put information technology spending on hold, hurting chip prices.
Infineon, the world's sixth-largest chip maker in terms of sales, was less upbeat on Wednesday about the rest of 2002 than it was in July when it reported an operating loss of 107 million euros ($106.6 million).
U.S.-based Micron, which designs and makes memory chips, said the Christmas season would offer some relief to this year's results as consumers buy digital cameras, video game consoles and personal computers.
"But to be honest, until we really see an uptick in corporate IT spending, I'm not terribly bullish," Mike Sadler, Micron's sales director, told Reuters.
Although some chipmakers have repeated their own growth forecasts in recent days, that has not calmed investor jitters over the outlook for the sector.
Texas Instruments Inc. (NYSE:TXN - News), the No. 1 maker of chips for wireless phones, on Wednesday left its outlook for the third quarter unchanged, as it reiterated its expectation of 5 percent revenue growth over the second quarter.
Also on Wednesday, one of the largest custom chip makers, LSI Logic Corp. (NYSE:LSI - News), backed its earlier forecast for 10 percent revenue growth in the third quarter.
Even so, with the chip industry still slowly recovering from its worst-ever slump, and demand so uncertain, mixed messages from major companies don't bode well, analysts said.
"If you're standing here and you have zero visibility, we all know from the past two years of experience that things are going to get worse," said Clark Westmont, an analyst with Salomon Smith Barney.
(Additional reporting by Erin Prelypchan in Shanghai, Eric Auchard and Siobhan Kennedy in New York) |
