From Albert: Good News from yesterday's SSB Conference:
09:46am EDT 11-May-00 Salomon Smith Barney (JOSEPH/WESTMONT 415-951-1887) IDTI
SSB Semiconductor Conference Day 1: Notes & Commentary Part 1
--SUMMARY:----Semiconductors
*Several firms presenting at SSB's Semiconductor Conference guided analyst
expectations higher,with expedites coming in from major communications OEMs
to their component suppliers. Despite recent stock price action and fears
over customer inventories, we believe demand trends remain healthy.
*In the PC components segment, AMD guided estimates up reflecting greater
optimism about manufacturing and infrastructure.Intel suggested the outlook
for PC growth, much of it overseas, is better than it has been since 1994.
*The "early read" from several semi companies is that growth through the
summer and the September quarter could be better, to much better, than the
seasonal norm. Certainly, there were few if any inputs from managements
that would support the recent sharp pullback in semiconductor stocks.
--OPINION-------------------------------------------------------------------
Integrated Device Tech (IDTI-$40-1H) very bullish. Management is
suggesting June (fiscal Q1) they are recording record bookings in the
quarter, and are virtually booked out for the June (fiscal Q1) quarter
and largely booked for the September quarter. What is taking off is an
acceleration of communications-oriented specialty memories, which are RAM
with a large piece of embedded logic. These FIFOs and Dual Ports, which
make up about 37% of sales, are currently growing about 40% yoy and are
generating operating margins between 40-50%. The second big seller is
SRAM, which continues to see very strong unit growth and firming pricing.
Given the strong outlook, the company is now guiding analysts to expect
$0.46-0.48 (versus $0.09), ahead of our $0.42 estimate.
Vitesse Semiconductor (VTSS-$46-2H) raised sales growth expectation for
the quarter to 12-15% sequentially, up from the 10-12% range discussed on
the company's conference call last month. (Our current model
conservatively projects 11% sequential sales growth.) The company's
improving optimism comes from order pull-ins from important
communications customers such as Lucent. Offsetting the top-line upside
is increased R&D spending due to recent acquisitions by Vitesse and new
product development. Based on design wins and early indications from
customers, management expects that growth could accelerate in the second
half of this year.
Galileo Technology (GALT-$15-2S) is cautiously optimistic that the
inventory correction the company suffered in the March quarter has been
largely cleared. Bookings have recovered steadily since Galileo
pre-announced an earnings disappointment in February. Consistent with
the management's guidance last month, 15% sequential sales growth looks
realistic for the June quarter, and the September quarter is beginning to
fill in nicely. Selected important customers are increasing order
volumes and pulling-in delivery schedules. Cisco Systems is Galileo's
largest customer, as well as Lucent, Cabletron/Enterasys, Accton, D-Link,
and HP. While the company is still hesitant to call a full recovery in
its business momentum, the current tone is encouraging.
International Rectifier# (IRF-$38-1H) already made its quarter. Though
there are still three weeks left in the quarter, we believe the company
has already made its revenue target for the quarter, which is slightly
above our forecast. We estimate revenues for the company will increase
about $20 million in the quarter to $217.5 million (up 10% from the
previous quarter and up 41% year over year). Demand is broad based, with
overall pricing remaining firm. Given the positive outlook, our estimate
of $0.47 (versus $0.06) appears low.
AMD# (AMD-$80-1S) also revising estimates upward. Management was very
clear that its confidence in the company's ability to exceed guidance
presented only a couple of weeks ago is rising. Previous guidance was for
essentially flat operating profit. Now the company is saying it will meet
and likely exceed EPS, which includes about $0.10 per share of one-time
gains. The upside is coming from the two directions that presented
possible roadblocks: (1) output from the Dresden fab is exceeding
expectations, and (2) the company is getting better "infrastructure"
support from chipset and motherboard makers than we had previously
forecast. We expect our $1.12 (versus a loss of ($1.10)) is at least
$0.05 low for the quarter.
Intel (INTC-$106,1M) looking for solid long-term PC growth. Intel's head
of marketing and sales, Sean Maloney, was as usual refreshing and candid.
Clarifying the announcement made yesterday about a bug the company found
in the MTH (memory tranfer hub) for the 820 chipset would probably impact
less than a million units, cost a couple hundred million, at most, on the
top line, and impact earnings by less than $0.05 per share. Management is
supporting the outlook for about 20% PC growth this year, which would
make 2000 the best year for PC growth since 1994. The main driver: the
Internet. The main regions: everywhere but the U.S.. The main
implications: Intel remains positive, despite the processor shortage,
which it expects to address by yearend (we suspect processors will remain
tight through the calendar year).
Xilinx (XLNX-$56-1H) continues to see very strong business trends, and
remains comfortable with 12-13% sequential sales growth guidance for
June. Much of the company's presentation focused on the high-volume
Spartan family that addresses applications such as consumer electronics.
At the Interop trade show this week, we found a very good amount of
Xilinx Virtex and Spartan devices scattered across a variety of platforms
and customers.
National Semi (NSM-$48-1H) reported that the May quarter is tracking as
expected and signed off on 30% revenue growth over last year's May
quarter, excluding Cyrix, which is in line with our estimate. In
addition, the company's backlog for the first fiscal (August) quarter is
shaping up. Overall capacity utilization remains about 85%, including the
S. Portland, Maine, fab at about 70%, and lead times are about 6 weeks.
National anticipates that its increasing exposure to the wireless
end-markets should help drive margins going forward; a new 4 device
chipset for GSM applications will be introduced in July. In addition, the
company expects to tape out a Gigabit Ethernet transceiver at
0.18-micron, with power dissipation of about 3 watts, in the next several
months.
Amkor #(AMKR-$38-1H) reiterated its forecast for strong 2H. Amkor
presented a bullish outlook for the year, citing strong long-term growth
drivers as well as highly positive customer forecasts for the second half
of the year. Unlike last year, when the company was caught with
insufficient capacity, this year Amkor is putting in equipment to support
the strong demand growth. The current quarter appears to be back-end
09:46am EDT 11-May-00 Salomon Smith Barney (JOSEPH/WESTMONT 415-951-1887) IDTI
SSB Semiconductor Conference Day 1: Notes & Commentary Part 2
--OPINION-------------------------------------------------------------------
loaded, as die support from foundries was somewhat below forecast in
March and April, though a recovery in May and June seems to be unfolding.
ST Assembly Test #(STTS-$33-1H) Management described an environment of
continued strong demand for mixed-signal test and suggested that the
company still holds a dominant position for any outsourcing of
mixed-signal testing. The company remains very comfortable with current
estimates and reiterated its outlook for flat gross margins. Even though
several of the utilization-bruising factors of Q1 are over, the company
is rapidly expanding capacity ($70-80 million in 2Q capex), which could
still keep utilization from reaching the company's target of 75-80%. |
