Chip makers first quarter seen solid
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.N, 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.O, 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.N
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.O. and Altera Corp. ALTR.O, 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.O April 22 profit $0.14/shr
Cypress Semi CY.N April 20 profit $0.07/shr
Intel Corp. April 13 profit $1.10/shr
LSI Logic LSI.N April 20 profit $0.05/shr
Motorola Inc. MOT.N April 13 profit $0.24/shr
PMC Sierra PMCS.O April 15 profit $0.34/shr
Rambus Inc. RMBS.O April 12 profit $0.08/shr
Texas Instruments April 20 profit $0.62/shr
VLSI TechnologyVLSI.O April 19 loss $0.01/shr
Xilinx Inc Q4 April 23 profit $0.25/shr
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