Chips rise as bulls take charge
Semiconductor stocks rebound after four days of losses
By Chris Kraeuter & August Cole, CBS.MarketWatch.com
Last Update: 4:19 PM ET March 15, 2002
marketwatch.com
NEW YORK (CBS.MW) - Chip stocks advanced for the first time all week while hardware stocks faded into the closing bell on Friday.
The Philadelphia Semiconductor Index ($SOX: news, chart, profile) rose 2.7 percent while the Goldman Sachs Hardware Index ($GHA: news, chart, profile) fell 1.1 percent.
For the week the Sox lost 6.8 percent while the GHA dropped 5.5 percent. For the year, the Sox is up 13 percent and the GHA is down 6.2 percent.
Ken Mayland, president of ClearView Economics, said following today's report on industrial production that the tech sector has turned the corner.
"Computer and office equipment, plus semiconductors, have registered several months of strong gains in output, and communications equipment production has stopped falling."
However, he noted that capacity utilization in high tech is only 61.5 percent with just 55 percent in communications equipment.
As for semiconductor companies, though, capacity utilization at leading edge geometries and technologies is broadly estimated to be 80 percent and higher.
Elsewhere, Laura Conigliaro with Goldman Sachs said end-market demand is the key to a substantial, sustained recovery.
"Whereas the second half recovery story used to be far enough away to forecast with impunity, as reality approaches it becomes that much tougher for tech companies to maintain a positive outlook," she said, according to a morning research note.
"In our opinion, aside from trading oriented arguments in favor of some interim rallies, it will require a sustainable improvement in demand to drive tech stocks considerably higher for more than short periods of time. At this point, we see no actionable evidence to this end."
Tom Laming, chief equity strategist with Kornitzer Capital Management, is bullish on the semiconductor area in general as he sees long-term demand intact and even increasing. His firm runs more than $1 billion for the Buffalo Funds family.
"Analysts become more concerned about valuations now as things are down just as when valuations were a lot higher. I'm always concerned about valuation, but now is not the time to become so focused on a trailing 12-month price-to-sales ratio."
He said most of his funds now carry an overweight in technology stocks mostly due to an emphasis in the chip sector. "The semiconductor industry just came out of its worst recession ever and that gives me confidence to buy stocks."
"We are way below trend from a capital spending level and from where revenues are likely to go just like we were way above it. For me to be bearish, I have to make an expectation that growth rates have deteriorated and I don't think they have.
Micron
Micron (MU: news, chart, profile) rose 4.3 percent to $33.39. According to a Dow Jones report citing the Korea Economic Daily, Hynix creditor banks will decide next week if sale negotiations will continue between Micron and Hynix.
Kornitzer's Laming said if a Micron deal goes through, then that's a positive for both the memory chipmaker and the memory chip market. "Micron will be able to control some additional capacity and that should say something about their ability to control pricing."
Even though a deal would make Micron the largest memory chipmaker in the world, Laming doesn't see any anti-trust concerns as losses are quite plentiful in this segment. "At the margin, that should sway Wall Street a little more and maybe people are waiting to see that before they become more positive on the stock."
Elsewhere, most major players in the chip segment advanced between 2 and 4 percent: Intel (INTC: news, chart, profile), Texas Instruments (TXN: news, chart, profile), Xilinx (XLNX: news, chart, profile) and KLA-Tencor (KLAC: news, chart, profile) and Novellus (NVLS: news, chart, profile).
PCs
The New York State Pension Fund said it would vote against the merger between Hewlett-Packard (HWP: news, chart, profile) and Compaq (CPQ: news, chart, profile). The largest PC merger ever will be put to a vote on Tuesday, March 19. See full story. H-P fell 35 cents to $19.05 and Compaq lost 37 cents at $10.33.
"While it is important for Hewlett-Packard to improve performance, in this case it is not clear that a bigger company will be more profitable or more competitive in the long run," said New York state Comptroller H. Carl McCall.
His comments came the day after the California State Teachers' Retirement System said it will stack its 3.3 million H-P shares, or roughly 0.2 percent of H-P, against the deal.
Dell (DELL: news, chart, profile), and Gateway (GTW: news, chart, profile) failed to gain while Apple (AAPL: news, chart, profile) added 2 percent and IBM (IBM: news, chart, profile) rose nominally.
Chris Kraeuter is a reporter for CBS.MarketWatch.com in San Francisco.
August Cole is spot news editor at CBS.MarketWatch.com in Chicago
Thanks for updating the tables Don!
RtS |
