Semiconductor Equipment . . . Cymer lowered 2nd quarter revenue guidance to $58-61 million (approx 12% lower than previously guided revenues of $67.6 million) versus consensus of $67.3 million due to ongoing slowness in semiconductor industry. According to CYMI CEO, "As a result of this revenue shortfall, we now expect gross margin to be in a range of 13 percent to 17 percent for the second quarter, in contrast to 17 percent to 22 percent in our April guidance." The company says visibility remains limited, and volatility remains high.
Taiwan Semi was downgraded at Merrill Lynch to Neutral from Buy based on valuation. The stock has exceed their $8.90 target. Also, the firm sees a lack of forecast upgrades from either fabless or OEMs raises the risk of a correction.
Semiconductors . . . Microchip reaffirmed 1st quarter revenues of $157-164 million versus consensus of $159.7 million.
Banc of America downgraded Texas Instruments to Neutral from Buy after company guided 2nd quarter sequential revenue growth to the 5% range from previous forecast of 7%. BofA is lowering its 2003 est. to $0.34 from $0.38 and 2004 to $0.75 from $0.80.
Texas Instruments sees sequential second-quarter sales growth of 5 percent instead of its target of 7 percent and earnings of 6 cents instead of a goal for earnings of 8 cents a share. This is based on lower revenue and higher charges related to restructuring of certain manufacturing facilities. The company sees an estimated sequential growth in its semiconductor segment of 2 percent versus previously anticipated 4%. TI blamed chip sales to wireless customers.
Microchip Technology still expects fiscal first-quarter sales between $157 million and $164 million. The maker of microcontrollers and analog chips kept its other financial targets the same, as well.
Semiconductor sector was cut to In-Line from Attractive at Morgan Stanley. While Morgan Stanley believes that industry's fundamentals are improving, the firm also thinks the sharp share price rise in recent months and the potential that near-term earnings risk may increase suggest the reward-to-risk relationship is becoming less favorable.
Texas Instruments was cut to Sell from Hold at Deutsche. Price target was cut to $16.
Micron indicated that its DRAM inventory continues to be at a low level, currently at 2-3 weeks, though slightly higher than its March level of below 2 weeks. Micron believes the inventory level in the industry is similar at 2-3 weeks. DRAM contract pricing has been flat to slightly up, with an upward bias for the month of June. Micron indicated that its 0.11-micron ramp is progressing well, with 25% of wafer starts at 0.11-micron process today. The percentage is expected to increase to over 50% by end-CY03. Micron is spending the incremental $100 million of its 2003 capex (at $1.1bn) on 0.11-micron process upgrades. The smooth 0.11-micron ramp will result in slightly higher bit shipments than we expected. Bit production growth in the May-Quarter was higher than the mid-teens growth previously guided for. Analysts are raising 2003 EPS estimate from $(2.73) to $(2.62), and 2004 EPS estimate from $(0.74) to $(0.60). The increase
reflects a rise in our bit shipment growth assumption from 44% to 47% for 2003. Analysts have left 2004 bit shipment growth estimate unchanged at 49%.
Nvidia’s new high-end chip, the GeForce FX 5900 (NV35), is currently in production and will be available in the retail market shortly, consistent with recent comments from the company. The company expects its share of the desktop discrete graphics market to stay flat at 65%, and expects continued share gain in the notebook discrete segment. Market share gain is also expected to continue in the integrated chipset market, as Nvidia's nForce2 chipset continues to increase its penetration. Nvidia indicated that whether it will be in the next-generation game console from Microsoft depends on the economics of any agreement, as well as a consideration of the opportunity costs. Nvidia noted that the development of the original Xbox led to significant diversion of resources from its core product development and negatively impacted the NV30.
Intel updated 2nd quarter 2003 guidance of $6.7 billion, up 6% Year over Year. On the flash side, it appears that Intel is more willing to cut prices to regain market share as it has excess capacity in flash. Intel mentioned Samsung is a formidable competitor on the flash side. Intel re-iterated that Prescott, the new desktop processor on 90nm, is on schedule for launch in 2nd half 2003. No launch date was specified. Intel emphasized the focus on ROIC. This could lead to tempered capex if the industry does not recover.
ATI Tech mentioned that talks on new game console contracts are going in the right direction, and the company is optimistic about the opportunity. Expect some new announcements in the August quarter. ATI specifically mentioned that details on the Nintendo agreement initially announced in February are forthcoming, which we think could be positive. For its new high-performance desktop discrete product, the company will use old R300 core architecture as it feels it has more legs. Plans to introduce a new architecture next year. ATI feels that IBM cannot compete with Taiwan Semi and United Micro on cost, service, and response. IBM is good at advanced technology and being ahead, but ATI has made a conscious decision to stick with TSMC and UMC. The company restated its May-quarter guidance of around $300mn in revenues, and a slight sequential improvement in adjusted net income and EPS. Our adjusted EPS estimate for the May quarter is flat at $0.04. ATI’s new desktop integrated product will be launched in the summer, as expected. The launch is clearly a positive development for ATI, which has focused on the much smaller notebook integrated market so far.
Boxmakers . . . Dell Computer COO Kevin Rollins backs guidance despite SARS impact on China. Overall, Rollins said that he does not see demand picking up, although he said that there is an improved sentiment about technology at the moment.
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