Semiconductor Equipment . . . The U.S. International Trade Commission declined to review an administrative judge's Jan. 29 initial ruling that ASML had not violated unfair practices in import trade. Nikon Corp., which brought the suit, said it plans to appeal to the Court of Appeals for the Federal Circuit in the matter and is "confident of ultimately receiving a favourable ruling."
Applied Materials announced a major restructuring plan last night after the close. The company will be closing 19 facilities and reducing its headcount by 2,000 people (or 14%). The goal of these actions is to reduce quarterly operating expenses $60 million by 3rd quarter 2003 (July) and $100 million by 1st quarter 2004 (Jan), and should result in an estimated $425 million in charges over the next four quarters. The company did not change its 2Q guidance given on February 11th. The goal of this restructuring is to reduce its breakeven level and create a model to provide roughly 5% net margins at a $1 billion quarterly run-rate by the end of the calendar year. Management noted no product lines have been cut. R&D and new product development have not been sacrificed, nor has the ability of the company to ramp product to meet customer demands.
The new focus will be on serving the major customers rather than specific regions. This should enable the company to reduce its services and support infrastructure, leading to further cost savings. Estimated Quarterly Charges Over the Next Four Quarters: 2nd quarter 2003= $155 million, 3rd quarter = $128 million, 4th quarter = $76 million, 1st quarter = $66 million. The cash component of these charges has yet to be determined. While these moves should improve the company's profitability it illustrates that management is less confidant in a near term return to predictable growth. Analysts will review estimates on Thursday March 20, after Applied's annual shareholder and analyst meeting.
The industry has now hit bottom but order patterns over the next few quarters will continue to be choppy and come down to the timing of a few large orders from a few large customers. At this point we feel the investor must be selective when evaluating these stocks using valuation, market position, technology exposure and balance sheet strength as guides. These criteria favor AMAT over the longer term as the company has the largest service, support and technology development organization combined with the broadest product portfolio of any semiconductor equipment supplier worldwide.
Semiconductors . . . First Albany downgraded Xilinx to Neutral from Buy, saying they believe the strong quarter is built into the share price and that ALTR is winning designs with its Stratix product. Price target $27.
ATI Tech signed a license Pentium M bus license agreement with Intel. ATYT announced it has signed a Pentium M bus license agreement with Intel, which gives the requisite rights to build integrated chipsets based on the Pentium M platform.
Street pricing for AMD and Intel desktop microprocessors continue to hold up well, with Intel parts trading slightly below list and AMD parts trading 10%-20% below list as illustrated in the tables below. Historically, Intel parts trade at a 20% discount to list, while AMD parts trade at a 40%-50% discount to list. The advent of "more mobile" notebook microprocessors from both Intel and AMD should buffer seasonal weakness in company margins. On the same day Intel launched Centrino, AMD debut a new line of thin-and-light notebooks (Athlon XP-M) and added seven microprocessors to its standard and desktop replacement notebook families last week. It is important to point out that while AMD's XP-M is essentially a powered-down version of AMD's Thoroughbred core, Intel's Centrino is based on a completely new mobile microprocessor design, referred internally as Banias and branded externally as Pentium-M. Checks suggest the performance specifications of Pentium-M in MIPS (millions of instructions per second) and battery-life terms far exceed anything AMD has to offer. In fact, according to technical reviews Pentium-M more than doubles the performance of Intel's own high-end P4-M, frequency for frequency. Nonetheless, AMD's XP-M is important, because it marks the company's first foray into the thin and light notebook market, which AMD has largely ignored. We believe there is significant growth ahead in this consumer-driven sub- market, particularly as WLAN becomes a standard feature.
DRAM Summary. In the contract market, our checks revealed that DDR and SDRAM pricing for 2nd half March is unchanged in the mid-$3 to mid-$4 range. Contract stability confirms our belief that the worst of the
seasonal downturn is now behind us. In the spot market, both SDRAM and DDR parts are now priced in the low to mid-$3 range. While spot quotes have been important indicators at times, we note that spot market represents only 10% of shipments at Samsung and Micron today. Although demand is slowly picking up again, weaker than expected ASPs for most of the quarter led us to lower earnings estimates on all DRAM names in our coverage yesterday.
Boxmakers . . . After retrenching from international operations 18 months ago, Gateway announced further restructuring efforts including: 1) closure of 80 Country stores; 2) workforce reduction of 17%; and 3) cost reduction efforts translating to $400 million in savings. While GTW is taking major actions to return to profitability and restart growth, reiterate Underperform rating owing to its challenged model. Gateway also preannounced a revenue and EPS shortfall relative to Street expectations and now expects revenue of $820-$850 mm (relative to $929 million estimate and consensus of $955 million) translating to an EPS loss range of $0.40-$0.43 excluding charges (versus consensus of $0.34). As to liquidity, the company still expects to exit 2003 with over $1 billion or $3.10/share. Though we are encouraged by GTW’s decisive efforts to drive down its breakeven, even after closing 30% of its stores, GTW’s “direct” model is still inefficient compared to Dell (SG&A at 20% of sales in 4th quarter 2003 versus Dell at 10% of sales). Moreover, as Gateway continues to scale back its business footprint, its strategy to diversify into consumer electronics retailer appears more at risk. While Gateway is still striving to return to profitability by 4th quarter 2003, analysts have opted for a more conservative stance in light of macro and competitive pressures. For 2003, analysts are reducing our EPS loss estimate from $1.30 to $1.10 on lower revenue of $3.25 billion, down 22% Year/Year, and for 2004 from an EPS loss of $0.90 to $0.50 on revenue of $3.3 billion.
2020insight.com
Thanks for the speedy update on that chart!
RtS |
