ST.Kurlak's 'Sermon on the Street'....and he 'spooked' thusly.
Barry: In case you haven't seen it yet.
Wednesday February 11, 9:27 am Eastern Time
RESEARCH ALERT - Merrill sees risk to chipmakers
NEW YORK, Feb 11 (Reuters) - Merrill Lynch analyst Thomas Kurlak said on Wednesday the 30 percent rally in the semiconductor SOX index since December 15 has increased the risk of holding semiconductor stocks.
-- ''With no recovery expected anytime soon and December industry sales falling at the fastest rate this decade, we believe an earnings recovery is not imminent,'' he said in a research note.
-- Unit growth has also deteriorated rapidly, he said.
-- Believes this reflects slowing end market growth since chip inventories were already substantially depleted in the 1996 correction, he said.
-- Kurlak said the worldwide semiconductor market contracted five percent in December from November and slowed to a 4.4 percent annual growth rate from 16 percent last August.
-- ''We estimate that based on current order data, worldwide sales growth will slow further and will go negative in January compared to a year ago,'' he said.
-- Kurlak said he remains convinced worldwide weakness in the chip market reflects softening end markets in addition to overcapacity.
-- Year-over-year unit shipments of integrated circuits shows rapid deceleration from last summer, from over 35 percent in July to over 21 percent in November, he said.
-- ''End market softness is driving prices of technology products downward,'' he said. ''This trend reveals a growing oversupply of products ranging from disk drives to cell phones to network interface cards to PCs.''
-- Sees Intel Corp (INTC - news) locked in a losing battle with its customers who want lower prices.
-- Sees high probability of third year of down dynamic random access memory (DRAM) chip prices.
-- ''In this stagnant environment we believe earnings will erode as costs grow due to the lag effect of new capacity additions still coming on,'' he said. |
