Chip Maker Results Shore Up Stock-Pickers, for Now
By Eric Auchard
dailynews.yahoo.com
NEW YORK 4/17 (Reuters) - Suppliers of semiconductors, the components used to create the building blocks of the communications revolution, posted a new round of improved financial results on Monday, vindicating investors who see the sector as the safest bet on booming technology demand.
Top names posting solid quarterly results and healthy growth outlooks on Monday included chip makers Texas Instruments Inc. (NYSE:TXN - news) , Lattice Semiconductor Corp. (NasdaqNM:LSCC - news) and Vitesse Semiconductor Corp. (NasdaqNM:VTSS - news)
Leading chip equipment supplier Novellus Systems Inc. (NasdaqNM:NVLS - news), reported sharply higher first quarter earnings on Monday benefiting from a surge in capital spending on new chip manufacturing capacity by silicon producers.
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``We are in a profoundly favorable environment for semiconductors,' said SG Cowen analyst Drew Peck of the strong demand, especially for chip makers selling into communications markets such as cellphones and network equipment.
He said demand for the products used to power a growing range of electronics around the globe was more favorable than at any time in the past 15 years, buoying an industry that is famous for its periodic booms and then cyclical busts.
Late on Monday, Texas Instruments, the world's No. 1 supplier of cellphone chips, said its profits edged slightly ahead of expectations, amid surging product demand and rising profit margins.
``Seasonally this is usually a weak quarter for them, and it came in stronger,' Salomon Smith Barney analyst Jonathan Joseph said of Texas Instruments first quarter results. ``Their (order) lead times stretched, their prices rose. All those are good signs, and TI is a good indicator for the sector in general.'
TI reported its results after the New York Stock Exchange closed. Its stock closed at 156 15/16 on the NYSE, rebounding about 19 percent or 25 3/16 after a huge drop on Friday.
``It would be hard for them to really beat expectations because the forecasts are so high,' SG Cowen's Peck said, who noted that revenues came up somewhat light in the fraction of its business that still supplies the hard disk-drive industry.
In anticipation of better-than-expected results from chip makers reporting results this week, investors went on a buying spree, sending the Philadelphia Semiconductor Index up 13.2 percent.
Intel Corp. (NasdaqNM:INTC - news), the world's largest chip maker, gained 12 1/2 to close at 123 ahead of the Santa Clara, Calif.-based company's earnings report due out following the close of trading on Tuesday.
The jump in Intel's stock helped propel the Dow Jones Industrial Average to a gain of 276.74 points on Monday. The rise, to 10582.51, eased some of the pain from Friday's 618 point drop. Friday's fall was the worst-ever single day point loss for the Dow index.
Boston-based Teradyne (NYSE:TER - news), a top maker of semiconductor production test equipment jumped 11 1/2 to 87 1/4 ahead of its own report due out on what Wall Street calls ``Super Tuesday,' the busiest day of this season's quarterly reporting period.
Chip companies PMC-Sierra Inc. (NasdaqNM:PMCS - news) and Altera Corp. (NasdaqNM:ALTR - news), both of which reported improved earnings last week, also saw gains in their stocks on Monday, as did Broadcom Corp. (NasdaqNM:BRCM - news), which reports tomorrow. All three are major beneficiaries of the demand by communications equipment makers for high-speed chips.
PMC rose 34 percent share to close at 159 1/4 on Monday and Broadcom jumped 22 percent to 148 9/16, Altera added 11 7/8 points to 84 7/16.
In its results on Monday, Lattice, a maker of logic devices used in communications and other electronic equipment, posted strong first quarter profits as revenues surged 134 percent to $126 million.
In a statement, Chief Executive Cyrus Tsui said the company was optimistic about its outlook for the future, citing ``strong general market conditions, (new product design wins) and an attractive new product pipeline.'
Fiscal second quarter revenues for Vitesse, which makes chips used in high-capacity telecommunications networks, were $100 million, up 50 percent from a year ago. The company described the quarter as ``excellent' with continued strength in sales of its datacom products and accelerating growth in sales of its telecom products.
Novellus said its net sales for the first quarter ended April 1 grew 43 percent to $274 million, as net income grew 75 percent amid record bookings, shipments and backlog levels |
