Zeev......an article discussing the state of the semiconductor industry......
biz.yahoo.com
Sunday July 5, 1:55 pm Eastern Time
Chip makers bruised in weak second-quarter
By Therese Poletti
SAN FRANCISCO, July 5 (Reuters) - U.S. chip makers, hit hard by overcapacity, economic doldrums in Asia and dramatic price cuts by personal computer makers, had a bruising second- quarter, amid one of the toughest years for the industry.
Starting next week, semiconductor makers will begin reporting their lackluster financials, many with restructuring charges due to layoffs, as companies continue to pare their operating costs to cope with the sluggish environment.
Both semiconductor companies and chip equipment makers have announced big rounds of job cuts, employee buyouts and layoffs in the past few months, cutting 30,000 to 35,000 jobs.
''(The) June and September (quarters) will represent the real low point for the industry and a more severe recession that people had anticipated,'' Cowen & Co. analyst Drew Peck said. ''I don't need to be digging under rocks to find how bad business is.''
Last month, Motorola Inc. in Schaumburg, Ill., said it would take a whopping $1.95 billion pretax charge in its second-quarter and cut 15,000 jobs, due to problems in its semiconductor products business, particularly in Asia.
Even before the charges, Motorola said that it would show a second-quarter operating loss, because of deteriorating demand and global pricing pressures, primarily in its chip business.
''Earnings season is expected to start on a low note,'' John Lazlo, a PaineWebber analyst, said in a report to clients. ''Earnings estimates for many companies in our universe have already been lowered ... the only company likely to beat expectations is Microchip (Technology Inc).''
After Motorola, Intel clone maker Advanced Micro Devices Inc., based in Sunnyvale, Calif., is also expected to report a loss, due to continuing problems in converting to the next generation microprocessor manufacturing technology, and more competitive pricing pressures from its rival Intel Corp.
The most anticipated earnings report will come the following week from the world's largest chip maker, Santa Clara, Calif.-based Intel. For weeks, there have been off and on again rumors that Intel would pre-announce a worse-than- expected second-quarter.
Then late last week, rumors that Intel will also announce additional jobs cuts or layoffs circulated on Wall Street.
In April, Intel said that its second-quarter revenues would be flat with its first-quarter revenues of $6 billion. Its gross profit margins are expected to be a few points below first-quarter margins of 54 percent of revenues and it already said it would cut 3,000 jobs, mostly through attrition.
''We expected Intel to report below the street consensus estimate of 68 cents a share, but slightly better than our 65 cents a share on $5.6 billion in revenue,'' Rob Chaplinsky, a Hambrecht & Quist analyst, said in a note to clients.
Intel in particular has been hurt by the glut of PC inventories, which fueled massive price cutting by PC makers. The surge in sales of PCs less than $1,000 has also hurt Intel, which has had to cut prices of its chips more frequently.
Intel competitor, National Semiconductor Corp. had a fourth-quarter loss last month, after warning that its loss would be bigger than expected and layoffs of 1,400.
Another highlight will be Texas Instruments Inc. of Dallas. TI, which recently said it would sell its money-losing memory business to Micron Technology Inc., is expected to have a profit, due to strength of its digital signal processors. TI is cutting 3,500 jobs as its scales down its global operations.
The following is a list of some major semiconductor makers and analysts consensus estimates as compiled by First Call:
COMPANY CONSENSUS YEAR-AGO DATE
Advanced Micro Devices loss $0.19 profit $0.07 July 8
Altera Corp. profit $0.38 profit $0.40 July 15
Atmel Corp. profit $0.02 profit $0.27 July 16
Cirrus Logic Inc., Q1 break even 0.0 profit $0.04 July 15
Intel profit $0.68 profit $0.92 July 14
LSI Logic Corp. profit $0.23 profit $0.32 July 23
Motorola loss $0.04 profit $0.62 July 7
Rambus Inc., Q3 profit $0.07 profit $0.02 July 14
Texas Instruments profit $0.36 profit $0.54 July 21
VLSI Technology Inc. profit $0.09 profit $0.26 July 15
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