Semiconductor Equipment . . . Jay Deahna at J.P. Morgan believes semiconductor equipment stocks "are more oversold now than at any point since early March," as concerns over fourth quarter order growth appear to be overblown. "We think a solid earnings season, an improving bookings outlook as the fourth quarter unfolds and traditional October to May stock seasonality suggests now is a trough," Deahna said in a note to clients. Among his top picks in the sector, KLA-Tencor, ASML Holding, Lam Research and Cymer.
Semiconductors . . . SIA released August-03 data on Sunday. The 3MMA revenue growth was seasonally strong at 12.3% Year over Year, compared to 10.5% in July 2003. Unit growth increased to 1.5% Year over Year from 0.3% in July. Revenue growth was slightly better than our estimate of 10.0%, while unit growth was slightly below our estimate of 2.0%. The 3MMA ASP increased 3.3% Month over Month to $0.447 from $0.433 in Jul-03, and improved 8.3% Year over Year. The stronger than expected ASP was due to a solid month from Application specific analog, MPU, DSP and DRAM, which we attribute to strong back to school season, solid notebook sales and a recovery in handsets sales. Among other major product groups, analog revenues (17% of total) were up 5% Month over Month and up 6% Year over Year. Standard cell and PLD revenues were up 1% Month over Month and up 8% Year over Year. Flash revenues and units increased 16% Month over Month. Prices remained flat Month over Month though units were notably strong in the >8Mb due to a strong month in handsets following the weakness in the June and July months due to the SARS effect. This pick up in wireless shows up in the DSP data as well where ASPs increased 10% Month over Month as revenues increased by 6% Month over Month. DSPs are predominantly used for the handset market. DRAM revenues (12% of total) increased 17% Month over Month and units were up 7%. ASPs increased for the third straight month. However, do not anticipate a downward pressure in DRAM spot prices in September as spot market participants continue to sell stock piled inventory. The SIA data essentially indicates that the ASP environment continues to improve, with positive Year over Year ASP growth
since Mar-03. ASP Year over Year comparisons have continually improved since September 2001 (-22% Year over Year). For the full year 2003, continue to forecast industry revenue and unit growth of 10% and 6% respectively, and expect growth to accelerate in 2004, with 15% revenue growth.
Celeritek plans to exit its wireless handset power amplifier business, resulting in the layoff of roughly 20 percent of its workforce. The company now plans to focus on gallium arsenide-based subsystems for the defense market and standard gallium arsenide semiconductors for the defense and communications markets. Celeritek said the exit of the handset business will decrease its annual cash burn by between $14 million and $16 million, and reduce its breakeven revenue level to $10 million per quarter from $18 million. The company expects to record up to $6.1 million in charges from the decision.
PMC-Sierra products selected for Lucent Metro Access System. The Metropolis DMX system provides seamless end-to-end optical integration and interworking capabilities to add data services onto SONET/SDH networks.
Applied Micro acquires IBM's PowerPRS Switch Fabric product line for $47 million.
ESS Tech upped to Buy at CE Unterberg with a $13-$14 price target. Firm says Vibratto II and Vibratto-S ramp will improve ASPs in a DVD player and the company's entry into the camera market should provide upside to 2004 estimates. Firm's price target is based on applying 1.5x to its CY04 sales estimates of $250 mln and adding back $3.92 in cash. Longer term, firm would like co to use its VCD and DVD position as a cash cow and develop products for other high volume end markets such as Digital TV.
NVIDIA cut to Sell at Merrill Lynch and cuts 2004-05 estimates well below consensus. The firm is saying they see no signs that the company's mobile computing and chipset businesses are about to improve. Also, firm believes that NVDA may begin losing share in its key discrete desktop graphics processor market, as just-completed checks in Taiwan suggest that competitor ATI Tech could begin gaining on NVDA in 4th quarter of this year. The firm also thinks the stock is expensive for a PC graphics company, although it's not expensive relative to its sector.
Silicon Storage licenses its SuperFlash technology to Toshiba. The agreement allows Toshiba to develop microcontrollers embedding SST's ESF1-500 (0.5 micron) SuperFlash technology and to reinforce its line-up of flash-embedded microcontrollers targeting a wide range of applications. In return, SST will receive licensing fees and royalties from Toshiba on sales of microcontrollers that incorporate the SuperFlash technology.
Boxmakers . . . Daniel Niles at Lehman Brothers upgraded Apple to "overweight" from "equal weight," citing "solid" back-to-school demand. Niles also believes the company is at the very beginning of a "significant" PowerMac upgrade cycle, and expects incremental music related revenue. He raised his price target to $24 from $22
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