Semiconductor companies see strong second quarter
By Therese Poletti
SAN FRANCISCO, July 8 (Reuters) - Semiconductor companies expect to report strong second quarter results, but PC-related chip makers were hurt by relentless price cutting and weaker demand, industry analysts said.
Intel Corp., the world's No.1 chip manufacturer, will kick off the second quarter earnings season on July 13 during which most chip companies are expected to meet or exceed estimates.
Strength in the wireless communications, networking and digital consumer end markets has driven growth in the overall semiconductor industry, said Mark Edelstone, a Morgan Stanley Dean Witter analyst, in a note to clients.
''The only real areas of concern continue to be DRAM (dynamic random access memory chips) and microprocessors,'' said Erika Klauer, an analyst with Deutsche Banc Alex. Brown.
Dan Niles, a BancBoston Robertson Stephens analyst, expects Intel to report about $6.75 billion in revenues, amid declining microprocessor unit shipments and falling average selling prices, due to its relentless price war with rival Advanced Micro Devices Inc. On Tuesday Niles trimmed his Intel estimates. AMD of Sunnyvale, Calif. last month pre-announced a bigger-than-expected quarterly loss of about $200 million.
On the bright side, Intel has higher-margin processors like the new Pentium IIIs and the Xeon for workstations and servers that will help offset the margin hit from its low-cost chips.
Edelstone pointed out that AMD was the only company to pre-announce a negative earnings surprise. This is in sharp contrast to first quarter 1998, when 15 companies pre-announced a negative earnings surprise and nearly 60 percent of U.S. chip makers reported worse-than-expected earnings, he said.
The year 1998 was the last year of the longest-running downturn in the global semiconductor industry, caused by the Asian financial crises, a glut of manufacturing capacity, ensuing memory chip price drops and inflated inventories.
In the past few weeks, two chip companies pre-announced better-than-expected earnings, exemplifying new growth areas.
Conexant Systems Inc., which was spun off last year from Rockwell International Corp., said its third quarter earnings will significantly top analyst consensus estimates. The Newport Beach, Calif.-based firm cited strong demand for its products for wireless, network access and personal imaging markets.
Dallas-based Texas Instruments Inc., which sold its money-losing memory business to Micron Technology Inc., is expected to see revenues grow about 15 percent, fueled by its strength in wireless with its digital signal processors.
Other companies making communications and networking equipment chips, such as Broadcom Corp., Galileo Technology and MMC Networks ''continue to be the most exciting growth driver for the semiconductor industry,'' said Merrill Lynch's Joe Osha. Osha expects communications-oriented chip firms to post on average 59 percent earnings growth in the quarter.
Another upside surprise came from S3 Inc., which has seen its financials revitalized from the success of its Savage family of graphics accelerator chips. Santa Clara, Calif.-based S3 could now possibly break even in the second quarter, instead of the previously-estimated loss of $0.20 a share.
The following is a list of several major U.S. semiconductor companies and consensus estimates, as tracked by First Call.
COMPANY CONSENSUS REPORTING DATE
Altera profit $0.25 July 15
AMD loss $1.26 July 14
Broadcom (Q2) profit $0.16 July 21
Conexant (Q3) profit $0.19 July 21
Cypress Semi profit $0.12 July 20
Galileo Tech profit $0.25 July 20
Intel profit $0.53 July 13
LSI Logic profit $0.18 July 21
S3 (Q3) profit $0.03 July 15
TI profit $0.86 July 20
Xilinx (Q1) profit $0.28 July 20 |
