Dan and thread:
AMD is in top ten of best performing S&P stocks for year 2000.....Intel called a laggard.
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It's Still the Quarter of Semiconductor Stocks: David Wilson
Princeton, New Jersey, March 15 (Bloomberg) -- Semiconductor shares have held onto their place as top first-quarter performers among U.S. stocks, even after taking a beating the past two days.
Intel Corp., the world's largest chipmaker, is the best- performing stock in the Dow Jones Industrial Average. Four other companies, led by LSI Logic Corp., rank among the 10 stocks with the largest percentage gains in the Standard & Poor's 500 Index.
An index of the S&P 500's chipmakers and chip-equipment companies is still on track for its biggest quarterly advance in more than a decade. The Philadelphia Semiconductor Index, composed of 16 of the industry's largest companies, has gained even more.
The stocks have risen amid growing demand for the companies' products, especially from makers of wireless phones and handheld computing devices, such as electronic organizers. Analysts said the gains also resulted from the companies' shift toward more specialized -- and more profitable -- types of chips.
``These are no longer commodity, cookie cutter, Lego (block) type of companies,' said Richard Whittington, an analyst at Banc of America Securities. ``That's a profound change.'
Rising earnings are likely to push semiconductor shares higher later in the year, analysts said. Some suggested, though, that the stocks may not rise any faster than their profits grow because they're relatively expensive.
``We're moving into a period of a lot more volatility in the group,' said James Barlage, an analyst at Lehman Brothers. ``I'd be more cautious going forward.'
Intel's a Laggard?
This week's trading illustrated Barlage's point. LSI Logic fell more than 15 percent Monday and yesterday. Two of the three other companies in S&P's top 10, Texas Instruments Inc. and Xilinx Inc., tumbled 14 percent apiece. The third, Advanced Micro Devices Inc., lost 7.6 percent.
Intel, which slipped just 1.9 percent during the two-day period, is one of only six stocks in the Dow industrials that have risen this year. Its 43 percent advance far exceeds the 23 percent gain in Hewlett-Packard Co., the second-best performer within the 30-stock average.
The Santa Clara, California-based company's shares have a chance to post their biggest quarterly percentage gain since the first quarter of 1987, when they soared almost 87 percent. Since then, the largest rise was 49 percent in the 1995 second quarter.
Within the S&P 500, though, Intel's a laggard. It doesn't even rank among the top 20 stocks, let alone the top 10 -- the position of Advanced Micro, its biggest competitor.
Advanced Micro has jumped 69 percent, good for sixth place. The Sunnyvale, California-based company said last month that any change in first-quarter sales from last year's fourth quarter will be an increase, instead of a decline. In the current quarter, it's beaten Intel twice in delivering the world's fastest processor.
Keeping Score
The other three semiconductor makers in the top 10 sell a lot of chips used in mobile phones and handheld computers. Demand for those products has supplanted personal-computer demand as the biggest reason for growth in chip sales, according to the Semiconductor Industry Association.
LSI Logic, the world's No. 1 maker of custom semiconductors, ranks third in the S&P 500 with a 122 percent gain. The Milpitas, California-based company makes chips that perform the functions of several semiconductors. It's meeting with analysts and investors this week to outline plans for wireless-communications and Internet-equipment products.
Texas Instruments has risen 62 percent and ranks eighth. Two-thirds of the world's mobile phones use the Dallas-based company's digital-signal processors, which translate sound, light and other signals into computer language.
Earlier this month, the company forecast that its operating margin -- profit after paying product costs -- would increase to 25 percent by the end of the year from 22.1 percent in the 1999 fourth quarter.
Xilinx has risen 57 percent, good for 10th place. The San Jose, California-based company is the world's largest maker of programmable logic chips, devices that help control the flow of information through computer networks. Customers include Cisco Systems Inc. and Lucent Technologies Inc., two of the world's biggest networking companies.
Counting Rambus
Analog Devices Inc., a manufacturer of chips for high-speed communications products, has also spent time in the top 10. Shares of the Norwood, Massachusetts-based company, which will split its stock 2-for-1 today, have risen 57 percent.
So has another company with ties to the chip industry: Tektronix Inc., a producer of testing, monitoring and measuring equipment. The Beaverton, Oregon-based company sells not only to chipmakers, but also to computer and telecommunications companies. Its shares have gained 51 percent this year.
S&P's index of 14 chip and chip-equipment companies in the 500 has risen 45 percent. The Philadelphia index, the basis for option contracts that trade on the Philadelphia Stock Exchange, has jumped 75 percent.
The difference in their gains partly reflects the latter index's inclusion of Rambus Inc., a Mountain View, California- based provider of technology that Intel uses to speed up its chips. Rambus stock has soared 513 percent so far this year, prompting the company to declare a 4-for-1 split last week.
If the quarter had ended yesterday, both indexes would have exceeded gains in the fourth quarter of 1998. The S&P index rose 44 percent that quarter, the biggest advance since at least 1988. The Philadelphia index rose 65 percent, its largest gain ever.
High Prices
Optimism about the industry's prospects is built into the value of indexes and their component stocks. Worldwide sales of semiconductors for January rose 33 percent to a one-month record of $14.8 billion, the chip industry association said.
The trade group said it expects sales, which rose 19 percent last year, to increase 20 percent this year and another 21 percent next year. Analysts have higher expectations.
``The industry will accelerate its growth rate,' Lehman's Barlage said. The 2000 figure may be as high as 25 percent, and the 2001 number will be in the range of 25 percent to 30 percent, he said. Whittington, the analyst at Banc of America Securities, said 40 percent growth through next year is a possibility.
Investors will have to pay dearly to take advantage of that growth. Stocks in S&P's chip and chip-equipment index trade at an average of 75 times earnings per share during the past 12 months, compared with 29 times earnings for the S&P 500.
LSI Logic, Xilinx and Analog Devices are valued at more than 100 times earnings. Micron Technology Inc., a Boise, Idaho-based company that's the largest U.S. maker of computer-memory chips, slipped from that level yesterday.
Increases in ratios such as these are ``basically over,' Barlage said, although earnings growth ``can still take these stocks higher over the next one to two years.'
If he's right, it may be a while before semiconductor stocks have another quarter like this one -- and it may not be long until there's a repeat performance of this week's setback.
Mar/15/2000 6:31
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