Jim: Note the discrepancy in the earnings release date in this article?
Headline: Chip companies' downtrodden earnings may have bottomed
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By Therese Poletti
SAN FRANCISCO Oct 4 (Reuters) - U.S. semiconductor
companies, still in the midst of one of the longest-running
industry slumps, are expected to report a lackluster third
quarter but analysts said that the worst may be over.
Buoyed by a rebound in personal computer sales - in part
due to the depletion of bloated inventories from earlier in the
year - chip makers that provide components to PC makers are
expected to report third quarter earnings that are flat to up
slightly, compared with the most recent dismal second quarter.
"I think the industry has seen a bottom here," said Mark
Edelstone, a Morgan Stanley Dean Witter analyst. "Everything
that touches the PC is doing pretty well. Everything else is
pretty mixed."
Last quarter was fraught with chip maker after chip maker
pre-announcing earnings disappointments, as the economic
malaise in Asia, a glut of PCs and memory chips and too much
manufacturing capacity all fueled an industry downturn.
While analysts still forecast a sharp decline in worldwide
chip sales this year - the third year of the industry downturn
- Wall Street has been heartended this quarter by the fewer
number of negative earnings warnings.
"We believe that most of the industry has hit bottom and
expect flat sales or sequential improvements in the third
quarter," said John Lazlo, a PaineWebber Inc. analyst. "Unlike
the prior three quarters, we do not expect much unfavorable
news." Very few companies have had negative pre-announcements.
Indeed, last month, the world's largest chip maker, Intel
Corp.(NASDAQ:INTC), which develops microprocessors - the brain chips
of almost 90 percent of the world's PCs - had a positive
surprise for Wall Street last month.
Intel said that it sees a better-than-expected third
quarter, due to strong demand in North America and Europe. Its
third quarter revenues will be eight to 10 percent above second
quarter's revenues of $5.9 billion, the Santa Clara,
Calif.-based company said.
Advanced Micro Devices Inc (NYSE:AMD) of Sunnyvale, Calif.,
which makes Intel-compatible processors and other semiconductor
products, is also expected to gain from the recent rebound in
PCs. While AMD is still expected to report a loss, it may be
narrower than the biggest bears on Wall Street are expecting.
"They have a good shot at getting close to break even,"
said Dan Niles, a BancBoston Robertson Stephens analyst. "They
are seeing a pretty good acceleration of their processor
business. Flash (memory) which hurt them last quarter is flat."
Unit shipments should be up strongly versus second quarter.
Texas Instruments Inc (NYSE:TXN). is also expected to see a
sequential boost in profits, since it has sold off its
money-losing memory chip business to Micron Technology Inc.
(NYSE:MU). This quarter will be TI's first without the DRAM
(dynamic random access memory) business.
"DSPs (digital signal processors)...will be more of a
driver and a bigger part of the revenue mix now that DRAMs are
gone," said Bill Milton, a Brown Brothers Harriman analyst.
"There will still be some residual losses from DRAMs in the
quarter." Milton said TI will have expenses from some of its
employees who were not absorbed in the Micron deal.
But while the PC industry is providing some bright spots to
the semiconductor industry, other chip makers develop chips in
the areas of analog, custom logic, memory, or
fortelecommunications are still under pressure.
Analog Devices Inc. (NYSE:ADI), LSI Logic Corp. (NYSE:LSI) and
VLSI Technology Inc. (NASDAQ:VLSI) have all pre-announced earnings
disappointments. ADI of Norwood, Mass. cited inventory buildup
and weak market conditions in Japan and Southeast Asia while
Milpitas, Calif.-based LSI Logic said sluggish sales in the
U.S. hurt its earnings.
San Jose, Calif.-based VLSI cited the overall industry
slump for an anticipated third quarter disappointment, but also
said that it expects an industry recovery sometime in 1999.
The following is a chart of earnings estimates, as compiled
by First Call, for some major U.S. semiconductor companies.
COMPANY ESTIMATE DATE
Advanced Micro Loss 13 cents Oct 6
Altera Corp Profit 38 cents Oct 14
Analog Devices (Q4) Profit 16 cents Dec 2
Cirrus Logic (Q2) Loss 2 cents Oct 21
Cypress Semiconductor Loss 2 cents Oct 13
Intel Profit 80 cents Oct 13
LSI Logic Profit 13 cents Oct 29
Motorola Inc Profit 1 cent Oct 5
Texas Instruments Profit 28 cents Oct 20
VLSI Technology Loss 1 cents Oct 16
(NASDAQ:CRUS), (NYSE:CY), (NASDAQ:ALTR), (NYSE:MOT)
Copyright 1998, Reuters News Service
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