Chip makers first quarter seen solid
April 4, 1999 03:19 PM
By Therese Poletti
SAN FRANCISCO, April 4 (Reuters) - Even amid signs of weaker-than-expected personal computer demand, U.S. chip makers are expected to report solid first quarter earnings, as networking and wireless applications fuel more demand.
So far, only one major semiconductor maker, Advanced Micro Devices Inc. AMD , has pre-announced an earnings shortfall, due to manufacturing problems and pricing pressures in the PC market.
"I think generally earnings are going to be quite solid," said Mark Edelstone, a Morgan Stanley Dean Witter analyst.
Edelstone noted that in the fourth quarter, only 24 percent of semiconductor companies reported earnings that were below Wall Street's expectations, compared with the first half of 1998, where more than half of the chip makers were missing their numbers, amid one of the most severe industry downturns.
"Utilization rates at semiconductor fabs (fabrication facilities) are increasing and lead-times are starting to expand," said Hans Mosesmann, a Prudential Securities analyst. "All of this points to what we believe to be the early stages of an industry wide semiconductor recovery."
The first company out of the gate will be Sunnyvale, Calif.-based AMD, which has said it will report a "significant" loss on Tuesday. The company, hit again by manufacturing problems with certain processing speeds of its K6 processor family, is also expected to announce a charge for layoffs.
Erika Klauer, a BT Alex. Brown analyst, said she is expecting AMD to announce a $50 million restructuring charge, which will be taken over the first and second quarters. Excluding the charge, she estimates AMD's loss will come in at about $0.57 a share.
The following week, all eyes will be on the earnings reported by Intel Corp. INTC , the world's largest chip maker, and for its outlook for the second quarter when it reports on Tuesday, April 13. Last month, Intel's shares took a temporary beating, as rumors swept through Wall Street that the Santa Clara, Calif-based firm would pre-announce lower-than-expected first quarter earnings, due to slowing PC sales.
"I expect Intel to exceed our $1.06 first quarter EPS estimate and deliver to the consensus estimate of $1.10," said Mosesmann. "The quarter for Intel has been characterized by concerns of a PC industry slowdown which we view as fairly normal seasonality."
Edelstone has $1.14 a share as an estimate for Intel and said he believes its earnings will come in line or better, with revenues down about 1.5 percent from the fourth quarter.
The stock of Dallas-based Texas Instruments Inc. TXN was also hit late last month, as some analysts learned that TI's sales of chips to disk drive makers were slower than expected during February. But sales of its digital signal processors, for wireless communications are still expected to be strong with about 20 percent growth in that fast-growing area.
Companies in the programmable logic device (PLD) area, such as Xilinx Inc XLNX . and Altera Corp. ALTR , whose chips are found in communications devices and networking products, will also fare well, with strong bookings. The makers of high-speed networking chips, such as PMC Sierra Corp. and Broadcom Corp. are also expected to have strong earnings.
The following is a list of some major U.S. semiconductor companies and Wall Street's consensus estimates, as compiled by First Call, which tracks analysts estimates.
COMPANY REPORTING DATE CONSENSUS
Altera April 14 profit $0.44/shr
AMD April 6 loss $0.56/shr
Broadcom Corp. BRCM April 22 profit $0.14/shr
Cypress Semi CY April 20 profit $0.07/shr
Intel Corp. April 13 profit $1.10/shr
LSI Logic LSI April 20 profit $0.05/shr
Motorola Inc. MOT April 13 profit $0.24/shr
PMC Sierra PMCS April 15 profit $0.34/shr
Rambus Inc. RMBS April 12 profit $0.08/shr
Texas Instruments April 20 profit $0.62/shr
VLSI TechnologyVLSI April 19 loss $0.01/shr
Xilinx Inc Q4 April 23 profit $0.25/shr
((Therese Poletti, SF Bureau, 415/677-2542)) REUTERS
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