trey,
from wsj - re:National Semi, LSI, MU and more. Well written article, imho.
......
In spite of the encouraging signs that some PC chip makers are on the
rebound, the news wasn't all good from the sector -- as profit warnings from
two other chip firms showed. After the market closed Wednesday, National
Semiconductor said softness in overall semiconductor demand, including the
personal computer market, would probably hurt shipments in the fiscal
first-quarter ending Aug. 30 and the second quarter ending Nov. 29 (see
article). Its shares fell 9/16 to 13 5/8 on the Big Board ahead of the news.
However, the company said new order rates improved late in the quarter,
indicating demand among some customer, including PC companies, may be
picking up. David Wu, an analyst at ABN Amro Inc., said Nat Semi's
problems couldn't entirely be blamed on weak market conditions. "They've
been disappointing for so long," Mr. Wu said, adding, "They aren't executing
well."
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Shares of Micron Technology, a maker of personal-computer memory chips,
have rallied this week on bullish comments from analysts about recovering
prices. Intel, the leading PC microprocessor maker, has reported shortages
of certain models of its Pentium II chips, possibly indicating a pick-up in
demand from customers. And Wall Street is growing increasingly positive on
progress by PC vendors like Compaq Computer to clear out earlier inventory
gluts, paving the way for renewed chip orders.
Unfortunately, LSI isn't a big player in the PC chip market, where most of
the good news is. LSI has "relatively little exposure in the PC business," says
Terry Ragsdale, an analyst at J.P. Morgan Securities Inc. "They weren't
hurt in the first half by the PC inventory correction and likewise they are not
benefiting" from improvements in the PC-chip market in the second half of
the year, he said.
Moreover, the markets where LSI does operate are feeling the sharp sting
of Asia's economic woes. The company makes so-called application specific
integrated circuits, or ASICs, chips that are special ordered by customers in
the communications, consumer-electronics and high-end computing sectors.
LSI's domestic customers include a range of companies across the
communications and computing industry, such as Sun Microsystems, Cisco
Systems and 3Com, but LSI spokesman Kevin Brett said the company
couldn't pin the slack demand on any single customer.
Mr. Brett said the company's third-quarter shortfall was primarily due to
negative effects the Asian economic crisis was having on product demand
for its U.S. customers, who make up close to half of its sales.
There were problems among consumer electronics customers too. Although
unit shipments of products to consumer firms was solid, Mr. Brett said
weakening Asian currencies were crimping sales figures. "We sell in yen
and weakness in yen is obviously going to affect the top line," he said.
LSIs products are found in a variety of consumer devices including the Sony
PlayStation, digital cameras and digital-versatile-disk players. Indeed, the
high number of Asian firms in the ASIC business, which includes NEC,
Toshiba and others, has allowed other ASIC vendors to price their products
more competitively than LSI.
"The competitive pressures in the ASIC industry are very, very high right
now," said Clark Westmont, an analyst at NationsBank Montgomery
Securities Inc. "About three quarters of the participants in this industry are
Japanese and Korean suppliers," he said.
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InSook |
