Barron's: Semiconductor Market Can
Only Get Worse
NEW YORK (Reuters) - If Wall Street thought the first quarter was a
tough one for semiconductor stocks, the second quarter will ``most
certainly be worse,'' according to Alan Abelson, columnist for financial
weekly Barron's.
Citing recent research on the semiconductor industry from Boston
investment research firm Fechtor Detwiler, Abelson argues against the
current pervasive sentiment that because semiconductor stocks are now
so low there is no place for them to go but up.
``The notion suddenly so popular in Wall Street that the absence of any
bookings means things can only get better, for some reason, the firm
reports, has utterly failed to reassure the sales reps and distributors who
peddle the semis and have been wrestling with a 'bigger issue than
inventory overhang,''' Abelson wrote.
``And, wouldn't you know, someone plumb forgot to inform folks in the chip business that pricing
pressure has been eliminated,'' he added.
Abelson also points to the recent hop in technology stocks, led by such top players as Micron
Technology Inc. (NYSE:MU - news), may have been slightly premature, given that other companies
are still reporting problems such as significant price pressures and excess inventory, to name a few, and
that those issues are not likely to be resolved in the near future.
According to the Fechtor Detwiler reporter, Abelson said, STMicroelectronics NV (STM.PA) has
offered to beat any competitor's price and guarantee a 30 percent margin to the distributor, a move
that can only hurt related companies like ON Semiconductor Corp. (NasdaqNM:ONNN - news),
International Rectifier Corp. (NYSE:IRF - news), Fairchild Semiconductor International Inc.
(NYSE:FCS - news) and Toshiba Corp. (6502.T)
He also notes how, according to Fechtor Detwiler, equipment makers such as Sycamore Networks
Inc. (NasdaqNM:SCMR - news), Cisco Systems Inc. (NasdaqNM:CSCO - news), Nortel Networks
Corp. (NYSE:NT - news) and Lucent Technologies Inc. (NYSE:LU - news) have ``gotten the word
from their broadband-carrier customers that prices have to be shaved some 40 percent, or they
needn't bother wasting their breath asking for new orders.''
``In brief, on closer inspection, that 'bottom' in semiconductors appears to be nothing more than an
optical illusion, a dreadful side effect, no doubt, of going so long without even a morsel of good news,''
Abelson wrote. |
