Semiconductor Equipment . . . Adams Harkness downgraded Varian Semi to Buy from Strong Buy based on their concern that 3rd quarter (June) will experience a sequential decline in revs and earnings from 2nd quarter. The firm continues to believe 2nd quarter is on track for revenues of $107 million and EPS of $0.14, but Samsung will represent a large portion of 2nd quarter revenues and they worry that a decline in revs from Samsung in 3rd quarter may not be offset.
Semiconductors . . . Intel's mid-quarter update yesterday (16 March) highlighted weakness in the company's flash memory business and strength in the microprocessor business. Both trends were in line with comments analysts have been making so far this quarter. The extent to which flash revenues have declined surprised us, however. The result is the trimming of 1st quarter revenue estimate slightly, from $6.818 billion to $6.758 billion. GAAP earnings estimates for the quarter remains unchanged at $0.11. Full-year GAAP earnings estimate also falls by a penny, to $0.61, as a result of a haircut to flash memory revenue estimates for the remainder of the year. Do believe that Intel's mix in the microprocessor business is improving, although management was unwilling to discuss the issue in detail yesterday. We're still Neutral on the stock. The company's competitive position is improving, and the stock is more reasonably priced than it was for much of last year. At the same time, valuation at 28x current-year forecast earnings is not attractive.
CIBC said Intel market share losses likely benefit AMD.
CIBC lowered Intel’s 2003 estimate to $0.55 from $0.65 and 2004 to $0.75 from $0.85. The estimate cuts assume a flash shortfall that may be as high as $100-$150 million, resulting from a market share loss of AMD and STN in response to price increases. Firm believes that more upside than downside faces INTC in the PC market as geo-political pressures are likely to alleviate.
National Semi upgraded to Hold at Deutsche. Price target $15.50.
Pacific Growth Equities morning note discusses the recent launch of several products by ATI Technologies and its rival NVIDIA. The analyst highlights the significance of the two graphics company's high-end processors (ATI's Radeon 9800 Pro and NVIDIA's GeForce FX 5800 Ultra) and describes ATI as "quietly winning respect" in the highly coveted enthusiasts market. However, the analyst believes the upcoming months will continue to be a "dogfight" for market share in the mainstream market. Pacific Growth Equities currently has an overweight rating on both ATYT and NVDA.
National Semiconductor reported slightly weaker than expected revenues of $404 million, down 4% Quarter over Quarter, and in-line proforma EPS of -$0.03 for 3rd quarter, which ended February 2003. The culprit of the revenue miss was weaker than expected turns business during the middle of the quarter. National's best performing products continue to be applications for the handset and notebook computer. Orders for portable power management grew 50% Quarter over Quarter. National provided details of a restructuring plan, which includes the divestiture of the company's low-revenue but high-R&D information appliance and GSM baseband businesses. Analysts are raising 2003 proforma EPS estimate from $0.06 to $0.10 and 2004 EPS estimate from $0.55 to $0.63 on the expected cost savings. At $16.60, National is trading at 26x revised FY04 (also essentially NTM) estimate of $0.63. While there could be upside to current valuations if the company achieves the cost savings it has targeted, we want to see if National can execute at the top line first.
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