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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: ild who wrote (52452)	4/14/2001 10:53:29 PM
From: ild	Read Replies (2) \| Respond to of 53903

nytimes.com April 15, 2001 Market Insight: Seeing Blue Skies, Again, For Chips By KENNETH N. GILPIN n the technology food chain, nothing is more basic than semiconductors and the machines that make them. If the chip makers are not doing good business, most technology companies will not fare well, either. Just now, semiconductor conditions could not be much worse. Until recently, the stocks reflected that bleak reality. On April 4, the Philadelphia Stock Exchange's Semiconductor Index, known by its ticker symbol "SOX," ended at 463, or 63 percent below its March 2000 peak. Since then, the chip stocks have been much livelier: over the last six trading sessions, the SOX index has jumped 29 percent. Jonathan Joseph, an analyst at Salomon Smith Barney, is at least partly responsible: after months of bearish comments, Mr. Joseph turned positive on the stocks last week. He took some time to discuss his sunnier outlook. Following are excerpts from the conversation: Q. It is widely expected that when a turn comes, semiconductor and semiconductor equipment stocks will lead the technology sector. What is that view based on? A. Semiconductors are the basic building block of the whole electronics industry. An integrated circuit is really a minicomputer used in everything from personal computers to cell phones to toasters. The value of semiconductor electronics in an auto today is higher than the steel. Q. You shook up a lot of people last July when you downgraded semiconductor stocks, citing deteriorating fundamentals. What do you see now? A. We are not seeing a lot of signs. In fact, what has surprised us has been the falloff in demand. Last summer, we thought the downturn would be due to excess capacity, which would pull down capital spending. We forecast that capital spending would grow 35 percent in 2001, down from more than 60 percent in 2000. Current forecasts are for a 30 percent to 35 percent decline this year. Q. So if demand has disappeared and capital spending plans slashed, why are you feeling better? A. These are highly cyclical stocks. You buy them when the prospects look bleakest, and you sell them when business looks the brightest. These cycles generally last about two to three years on the upside, and about a year on the downside. And there have been a couple of things that have caught my eye. In March, Cypress Semiconductor had virtually no net new orders. That has never happened before. If they only get one order this month, it will be an improvement. Second, we have seen better-than-expected demand out of Taiwan's motherboard business for the last three months in a row. That's important, because 80 percent of all personal computers go through Taiwan to pick up parts or to get assembled. We had written the personal-computer market off for dead this year. These are soft data points. But by the time you get hard data points the stocks have already moved. Q. Your call got a lot of attention, partly because so many on Wall Street remain so bearish, partly because you were so right about the downturn. What has the client reaction been? A. Seven out of eight calls from institutional investors have essentially been that I have no factual basis to make this forecast. I find that very encouraging. Last summer, they had much the same sort of reaction when I turned negative. Q. It's not like your optimism has no bounds. Last week, you said that over the next few months the SOX could trade as high as 700, but has a potential downside of around 400. A. When I made the call, the SOX was at about 500. I thought the upside potential was about 40 percent. The index has moved up a lot since, but what we are saying here is that we would be opportunistic and would be buyers of the stocks up to 700, but to expect pullbacks. Eventually, this group is going to double or triple. Q. Which stocks do you like? A. We upgraded all eight that we follow, a list that includes Intel, Micron, ST Microelectronics, Texas Instruments and Altera. All of the names are very high quality. Our semiconductor equipment analysts also upgraded the companies they follow, including Applied Materials and KLA-Tencor. Q. Where do you expect to see demand picking up first? A. Last year, there was a serial decline in demand that began with the PC manufacturers, followed by the wireless companies and then the wireline users. Now it looks like it will come back in that fashion. Q. How sure are you that conditions will improve over the next year? A. There is no doubt that things will look much better. If they don't, we will be in a very serious recession and I'll be teaching English in Japan. Copyright 2001 The New York Times Company