To The Street: Look at the Big Picture
With the release of the Semiconductor Industry Association (SIA)'s June numbers, we now have confirmation of what just about everyone in the chip business knew already: the second quarter of 2000 was the best three-month period in the history of the semiconductor industry. April, May and June: three record-breaking months, each outdoing the last, each setting a high-water mark for semiconductor sales.
June sales of $16.6 billion were up 5.2 percent from May and up a whopping 48 percent from June 1999. Second-quarter sales were 41 percent higher than in the same period in 1999, according to SIA figures. For the first six months of the year, sales are up more than 37 percent compared to the first half of 1999.
The outlook for the second half of 2000 is even better. We are still months away from the traditional annual peak of semiconductor sales. In eight of the last 10 years, November was the peak month for chip sales, based on the SIA's historical data for the three-month moving average of worldwide market billings (although September is the traditional peak month based on single-month sales). From 1990 to 1999, the peak month for semiconductor sales in each year has always come in the fourth quarter and never in the second quarter, according to the three-month moving average data.
Though <b<there are some indications that the traditional seasonal pattern in the semiconductor market may have changed somewhat, the past can still be a good indicator of future performance.
Research organizations now are taking another look at their forecasts for 2000, even though most of them have recently upped their predictions.
Longer term, nearly all research organizations are predicting that growth will persist at least through 2002, with some forecasters predicting the boom will last until 2003.
So, with all that being said, Wall Street should be running to cash in on the boom. Instead Wall Street seems to be seeking any excuse to hammer the semiconductor sector.
Two weeks ago, LSI Logic Corp. reported earnings that were in-line with estimates, but revenues that fell short. LSI's problems stemmed from a short supply of parts for chip systems and difficulties in expanding an enterprise resource planning system, not from lack of demand. The news spurred a cut in the company's ratings, a plunge in its stock and a rout on Wall Street that saw the NASDAQ fall by more than 1 percent.
Just last Thursday, a report from Kulicke & Soffa that results for its current quarter would be affected by customer order delays due to substrate shortages sent the NASDAQ, semiconductor stocks and semiconductor equipment stocks tumbling. This despite the fact that it's still far from clear if this shortage will affect the larger chip industry. While the NASDAQ and many of the semiconductor stocks recovered, the whole event still astounds me.
Wall Street should control its knee-jerk reactions to every bit of bad news and focus on the big picture: the semiconductor industry is booming. Silicon Valley calling Wall Street: Get a clue.
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