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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: 2MAR$ who wrote (15479)	4/9/2001 11:44:27 AM
From: ColtonGang	Read Replies (2) \| Respond to of 37746

Analyst Actions: Niles Annihilates Semiconductor Stocks By David A. Gaffen Staff Reporter 4/9/01 9:20 AM ET Lehman Brothers' Dan Niles is getting medieval on the semiconductors this morning. The chip analyst revised his forecast for 2001 semiconductor revenue to negative 18% to 20% from a previous forecast of slippage of growth somewhere in the high single digits. Such a tremendous decline in growth is akin to a recession in the sector. As demand has slipped dramatically, companies have been faced with overcapacity and falling profits. Various industry associations have reported declining orders throughout the first quarter, and Niles expects that activity to continue through at least the third quarter. He said he sees very little hope for the sector right now, with falling interest rates the only real positive. But falling rates won't necessarily boost demand, nor will it improve conditions in the three major industry groups that the semiconductor sector supplies: PC makers, wireless companies, and networking companies. "Though we believe that we are likely to hit bottom in terms of comparisons in August for semiconductor revenues, we could see low levels of demand persist for several more quarters depending on the macro conditions," he wrote, saying that this rebalancing of the supply-demand curve could take two to three years to work out. Niles lowered second-quarter estimates on Intel (INTC:Nasdaq - news) to 65 cents from 70 cents a share; on Texas Instruments (TXN:NYSE - news) to 65 cents from 75 cents a share, and on Cypress Semiconductor (CY:NYSE - news) to 50 cents from $1.36 a share. In his note, Niles puts forth the theory that the free spending by dot-coms spurred a large "investment cycle by their S&P 500 competitors who were spending large sums of money to build a Web presence to compete." Now the dot-coms are gone and the other companies seem satisfied (for now) with their network. "The extent of this slowdown is probably most evident by the auctions in California of Cisco (CSCO:Nasdaq - news), EMC (EMC:NYSE - news) and Sun (Microsystems) (SUNW:Nasdaq - news) equipment at 10 to 20 cents on the dollar by failed businesses," he notes. As a result, the level of capacity utilization (the amount of a company's existing production being used for manufacture of goods) has dropped dramatically over the last year. In the second quarter of 2000, manufacturing was at full tilt, with utilization at 98.5%. As of February, it had plunged to 80%, according to the Federal Reserve. Intel was lately a bit higher in preopen trading, while Cypress and Texas Instruments were inactive.