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Politics : Formerly About Advanced Micro Devices
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To: Maxwell who wrote (28448)2/12/1998 5:51:00 PM
From: Maverick  Read Replies (1) of 1573853
 
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 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.
((Wall Street desk 212-859-1730))
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