Merrill eyes 7 makers of chips for e-appliances
NEW YORK, Feb 3 (Reuters) - Merrill Lynch said on Thursday it has identified seven technology companies that should benefit from the proliferation of electronic appliances (e-appliances) made possible by advances in chip technology.
Demand for e-appliances such as hand-held devices such as 3Com Corp.'s (NasdaqNM:COMS - news) Palm Pilot products, digital cameras, video games and digital set-top boxes will provide good investment opportunities for the companies, Merrill said.
The handheld device market is expected to grow to $1.1 billion by 2003, up from $420 million in 1999. Companies poised to benefit from this market include makers of flash memory, which does not need power to retain its stored information. SanDisk Corp. (NasdaqNM:SNDK - news), is one of those companies, and Merrill Lynch has rated it with a near-term accumulate and long-term buy ratings.
In addition to the handheld device market, SanDisk also supplies flash memory to markets for digital cameras and MP3 players, which are devices that let listeners enjoy songs that have been digitally transferred from the Internet, Merrill said.
Merrill also singled out Linear Technology Corp. (NasdaqNM:LLTC - news), even though it derives less than 10 percent of its revenues from the e-appliance market. As a leading supplier of so-called low power amplifiers for handheld devices, Merrill Lynch rates it a near-term accumulate and long-term buy.
Merrill also identified companies involved in the digital camera industry. Digital cameras use ``image processing logic,' which compresses, stores and displays images, and LSI Logic Corp.(NYSE:LSI - news), which makes a single chip that can process images, is well positioned in this market, the brokerage firm said. It rated LSI Logic at near-term accumulate and long-term buy. Merrill said LSI gets 16 percent of its revenues from e-appliances and is also a major player in the market for set-top boxes, the increasingly sophisticated cable converter boxes that offer features such as programming menus.
LSI Logic is also set to do well in the video game market, Merrill Lynch said.
Another promising e-appliance market is home networking devices that connect multiple personal computers, gaming devices and other appliances. As high-speed digital subscriber lines and cable modem Internet services become more available, the connection will be more important, the analysts said.
Broadcom Corp. (NasdaqNM:BRCM - news) and Conexant Systems Inc. (NasdaqNM:CNXT - news) are well-positioned to benefit for growth in this market, Merrill Lynch said.
Broadcom receives about 50 percent of its revenues from the set-top box and cable modem markets, and is a leading player in the emerging home networking market. It is rated both a near-term and long-term buy.
Conexant, which is a leading supplier of chips that are used for high-speed Internet access, such as chips for digital subscriber lines (DSL), was rated by Merrill at near-term accumulate and long-term buy.
Demand for faster devices to connect people to the Internet such as DSL, cable modems and digital set-top boxes will drive the growth of many different semiconductor companies, Merrill Lynch said.
National Semiconductor Corp. (NYSE:NSM - news), while it has nominal e-appliance revenues, is targeting the set-top box market, as well as the handheld device market, Merrill Lynch said. It is rated accumulate for both the near-term and long term market.
MP3 players, the devices that let listeners enjoy songs that have been digitally transferred from the Internet, represent another e-appliance market that Merrill Lynch estimated will see demand for semiconductors grow 57 percent a year through 2003 to a $338 million market.
Two companies that are well-positioned in the MP3 market include SanDisk and Texas Instruments Inc. (NYSE:TXN - news), which is rated buy for both the near-term and long-term. Texas Instruments also is an emerging player in the DSL and cable modem chipset markets. |
