2020insight.com
Semiconductors . . . Lehman upgraded Intel to Overweight from Equal-Weight and Advanced Micro Devices to Equal-Weight from Underweight based on the following factors: 1) improving corporate profits should drive increased business investment, 2) the installed base continues to age with about 180 million PCs over 4 years old, and 3) Win95 enters end of life at the end of this year and Windows 98 and NT4.x enters the non-support phase for Microsoft on June 30.
October Microprocessors revenues decreased by a seasonal 37% Month over Month, after increasing 58% the previous month. Units fell by 34% Month over Month, while ASPs decreased by a more modest 5% Month over Month as the pricing war between Intel and AMD essentially halted entering 4th quarter. Expect pricing to remain relatively stable in November, although both companies cut list on selected products to create pricing headroom for high-end product introductions. Intel’s ability to deliver high frequency processors at low manufacturing costs will allow it to continue taking market share from AMD at least through 1st quarter 2003.
DRAM sales increased 3% Month over Month to $1.312 billion in October, and are up 126% Year over Year on easy comparisons. Bit shipments were up 3% Month over Month during the month of October to 223 million 256Mb equivalents, while ASPs for 256Mb equivalents are essentially flat Month over Month at $5.89. MPU & DRAM pricing monitors, SDRAM pricing is stabilizing into the high-$2 level (per 256Mb), while DDR pricing remains in the high-$7 range. DRAM pricing should weaken slightly in the months of November and December as demand begins to roll over and as DDR supply continues to increase. Do not expect a dramatic pricing decline, however, as the industry has been under spending on capacity additions for the last 18-months.
Total analog billings for October decreased 10% sequentially to $2.086 billion, on unit decline of 10% Month over Month and flat ASPs of $0.60. Standard products represented 38% of all analog sales, up slightly September, while application specific products comprised the remaining 62%. Standard analog products and application specific products each declined by approximately 10%. The difference occurred in pricing, where standard product ASPs increased 3% Month over Month, while ASPs in the comparatively less stable application specific business fell 3% Month over Month. Most of the analog companies appear on track for a flat 4th quarter, but most will also require higher turns as lead times continue to be minimal.
Flash revenues experienced a 25% Month over Month seasonal decrease in October as we had expected, to $690 million, after a heavily back-end loaded 3rd quarter 2002. ASPs for 16Mb equivalents increased 5% Month over Month to $3.73 from $3.55 in September, while units fell 29% Month over Month to 185 million equivalents. Both units and ASPs will be up again in November driven by strong wireless demand. Recently, better than expected demand has led some NOR flash manufacturers, most notably Intel, to become more positive about the pricing environment in 1s quarter 2003.
Bernstein says that the typical December strength in semiconductor stocks is unlikely to be as large this year as in prior years given the nearly unprecedented run-up in these stocks during October and November. The firm would look to lighten exposure going into the end of the year, and would view any positive catalysts as good exit points, particularly for National Semi and Texas Instruments.
Bear Stearns downgraded Integrated Circuit to Peer Perform from Outperform based on expectations that ICST's share gains in the PC market will slow over the next few quarters. The firm cuts 2003 estimate to $0.86 from $0.89 and 2004 to $1.11 from $1.19, and believes that now would be an opportune time to take profits.
Bear Stearns upgraded Intersil to Outperform from Peer Perform. The firm says they believe the ramp of 802.11g WLAN products is likely to be strong in 2003 and that ISIL is likely to benefit as it distances itself from much of its competition. The firm raised 2003 estimate to $0.91 from $0.84.
With two months of Intel’s fourth quarter behind us, Merrill Lynch is raising revenue and earnings estimates to reflect a seasonal build that has been better than expected. The revenue estimate is going from $6.7 billion to $6.9 billion, and earnings estimate is being raised by a penny, to $0.13. For 2003, the earnings estimate is being raised as well, from $0.65 to $0.67, as a result of a change in our flash memory revenue forecast. Expect Intel to move towards our target when the company issues its mid-quarter update this Thursday. At the same time, ML maintains a conservative stance towards the stock. ML fails to understand how investors could make money on the stock with the multiple already at 31x new 2003 estimate, and also note that the stock is well above $14 fair value estimate, which we are not changing. Although it’s true that Intel’s stock has been rising during the past few weeks, it is also true that the stock has been underperforming the Philadelphia Semiconductor Index (SOX), which has risen 40% over the past month while Intel has risen by 27%. That reflects the market’s understanding that Intel is not attractively valued relative to its growth prospects. Any business recovery that Intel is seeing is already more than discounted in the company’s stock, and ML is reiterating our Sell rating.
(Thanks to Les H. for link) |
