Frank I have been looking around for support of what these analyst are saying is worrying them about Dell's Q4. No respectable news org has anything but positive comments about pc sales and resulting earnings expectations. So I'm betting those broker's are just trying to get a better price cause they missed out by being too dumb to realize IMO. I guess they figure they don't have to be smart as long as they can manipulate a stock to their needs. It should be a crime but that's free enterprise for you.
interactive.wsj.com
Analysts Predict Chip Companies
Will Post Strong Results in Period
By SCOTT EDEN
Dow Jones Newswires
NEW YORK -- U.S. semiconductor companies continued to flourish in the
fourth quarter, with consumer demand for personal computers and other
chip-controlled devices overshadowing a slight premillennium slowdown in
corporate PC sales.
On a rebound since fall 1998, when the industry emerged from the worst
recession in its history, chip companies are expected to meet or exceed Wall
Street's fourth-quarter earnings estimates.
"Expectations are aggressive, but I think they can be beat," says David Wu,
an analyst with ABN Amro.
According to First Call/Thomson Financial, analysts see fourth-quarter profits
for companies on the Dow Jones Semiconductor Index increasing an average
42% from the year-ago period. Full-year estimates for the chip group are up
an average of 48% from 1998 earnings. That's an easy comparison, however;
in 1998 the industry was still smarting from inventory problems and the Asian
economic crisis.
Such optimism stems partly from this year's holiday buying season, when
consumer sales of cell phones and electronic items such as set-top boxes
and digital cameras outstripped experts' already sanguine forecasts.
Help From Asia, Internet
Analysts also credit quickly recovering economies in Asia -- where the
industry derives some 25% of its revenue, according to Lehman Brothers
analyst Jim Barlage -- and the Internet boom, which created fierce demand for
silicon used in networking gear, modems, wireless technology, as well as
PCs.
Furthermore, semiconductor buyers may have gone on a modest shopping
spree during the quarter, boosting their microchip inventories as a precaution
against Y2K-related production glitches. According to Mr. Wu, that inventory
build-up added an average 2% to companies' fourth-quarter revenue. But it's
not all good news: bulging semiconductor provisions would in turn reduce
companies' first-quarter revenue by the same amount.
Missing out on that Y2K chip binge were the industry's highest-profile names:
microprocessor makers, including Intel Corp., the world's biggest
semiconductor concern, and Advanced Micro Devices Inc. Both firms --
locked in a high-profile megahertz speed war -- had trouble meeting brisk
demand for their newest processors.
Still, helped by those strong PC sales, Intel should meet or slightly surpass
consensus estimates for the quarter of 63 cents a share, compared with the
split-adjusted 60 cents it reported a year ago. If Intel, Santa Clara, Calif., had
more accurately forecast demand for its chips and stepped up production
capacity accordingly, the earnings upside could have been more pronounced,
analysts agree. A scarcity of Intel components, for instance, forced Gateway
Inc. to warn that it will miss its quarterly financial targets.
AMD, meanwhile, stands to finally halt the red ink it's recently bled because
of aggressive price cuts by rival Intel earlier this year. The Sunnyvale, Calif.,
company, which hinted at a possible profitable quarter during an analysts'
meeting in November, consistently sold out of its latest and fastest processor,
the Athlon, and experienced a surge in sales of flash-memory chips, which
are used in cell phones and high-tech devices such as satellite navigation
systems.
Because AMD's fourth-quarter results are teetering on the fulcrum between
losses and profits, forecasts for the company's bottom line vary widely. Mr.
Wu says earnings could go as high as 15 cents a share, while Lehman's Mr.
Barlage sees six cents. SoundView Technology Group analyst Scott Randall,
on the other hand, has a loss of a "couple cents" a share -- in line with First
Call's consensus target. "But it wouldn't surprise me if they were north of
break-even," he adds. In last year's first quarter, AMD earned 15 cents a
share.
But the big story of the fourth quarter -- and all of 1999 for that matter --
concerns chips made for communications technology, demand for which
helped overall semiconductor sales reach a record $14.2 billion in November,
according to the Semiconductor Industry Association. Climbing sales also
galvanized investor interest in the group, igniting a stock-price explosion in the
chip sector in 1999.
Cell-Phone Sales Boost TI
The public's growing appetite for cell phones should help Texas Instruments
Inc., the nation's largest supplier of chips for wireless devices, register
impressive results for the quarter. That's good news for the Dallas company,
since sales in other segments, namely chips for hard drives and analog
modems, have been sluggish.
SoundView's Mr. Randall recently increased his view of TI's fourth-quarter
earnings-per-share to 48 cents from 45 cents, which excludes write-offs from
the acquisition of Unitrode. Mr. Randall's latest estimate is a penny above the
consensus number. The company reported operating earnings a year ago of
30 cents a share on a post-split basis. The figure also omits charges from
selling some European operations.
Among smaller companies, Analog Devices Inc., a Norwood, Mass., maker of
specialty semiconductors, should start the first quarter of its fiscal year by
racking up some explosive gains compared with last year's dismal showing.
Fueled by new supply contracts for its digital signal processors -- which are
used in networking gear, modems and PCs -- the company is expected to
weigh in with earnings of 44 cents a share, according to First Call, up 144%
from the year-ago's 18 cents.
Erika Klauer, an analyst with Deutsche Banc Alex. Brown, expects Linear
Technology Corp. -- whose profit margins she considers "the best in the
semiconductor business" -- to post strong earnings in its fiscal second
quarter. The company's fabrication plants, which turn out analog chips for
anything from cell phones to radar systems, are among the most efficient in
the industry, Ms. Klauer says.
Wall Street's target for Linear, of Milpitas, Calif., is 38 cents a share, up from
the split-adjusted 30 cents it posted last year.
TTOSBT |
