Pixelworks, Genesis Micro Fall On Chip Pricing Pressure
DOW JONES NEWSWIRES
By Maria P. Vallejo
Of DOW JONES NEWSWIRES
NEW YORK -- Genesis Microchip Inc.'s (GNSS) and PixelWorks Inc.'s (PXLW) shares tumbled more than 10% Thursday on
fears of a flat panel shortage, increased pricing pressure and more competition in the flat panel display market.
In the past three days, four research firms - DisplaySearch, Hoefer & Arnett, Pacific Growth Equities and Prudential Securities -
detailed issues surrounding components suppliers of flat panel displays. As a result, Genesis' stock dropped as much as 16% to
$20.07 and Pixelworks shares fell as much as 11% to $8.80 in midday trading.
A PixelWorks spokesman said the Tualatin, Ore., firm doesn't comment on stock activity because of company policy. Officials at
Genesis couldn't immediately be reached for comment.
Some analysts believe the panel supply shortage will force manufacturers to push out chip orders, while increased competition
from Taiwan will create pricing pressure on liquid crystal display, or LCD, chips.
Analyst Jay Datta of San Francisco-based Hoefer & Arnett cut his fiscal 2003 earnings estimate for Genesis Microchip to $1.01 a
share from $1.35 a share, citing the "severe" price war in the market.
He forecasted a decline in LCD chip revenue because reduced prices will outweigh most of the expected volume increases. Datta
owns a "few hundred shares" of Genesis Microchip, but can't sell his holdings for two days after downgrading the stock.
A Pacific Growth Equities research report Wednesday also noted that Genesis Micro's and PixelWorks' average selling prices are
eroding faster than those of other companies in the industry.
The San Francisco, Calif., research firm said it sees "little hope" of PixelWorks reaching its goal of 33% market share of the
controller chip market by year end, which is significantly above its 5.8% market share held in the fourth quarter.
In fact, increased overseas competition is expected to whittle away at market share for both PixelWorks and San-Jose based
Genesis Microchip. But, Genesis may have an easier time with its market share of 71%, which it held as of Dec. 31.
"I'm fine with the competitive environment. I agree capacity is tight, but it's not constrained," said Robert Adams, an analyst at
Toronto-based CIBC World Markets.
"Anyway you cut it, this guy (Genesis Microchip) is the dominant player in second half. I think the aggressive selling in the near
term is really overdone," he added, remarking on the company's large market share. Adams holds about 200 shares of Genesis
Micro, which he can't sell because he has an investment rating on the company.
Analyst Kalpesh Kapadia of New York-based C.E. Unterberg, Towbin also expects Genesis Microchip to recover in the long
term because of its significant market share. Kapadia holds no shares in Genesis Microchip or PixelWorks.
-By Maria P. Vallejo, Dow Jones Newswires; 201-938-5400
Updated April 4, 2002 4:32 p.m. EST |
