Semiconductor Index Hits 3-Year Low
By Duncan Martell
SAN FRANCISCO (Reuters) - Semiconductor stocks tumbled yet again on Thursday as concern that slack demand for personal computers, handheld electronic devices, cell phones and computer servers pushed the Philadelphia Stock Exchange Semiconductor Index (^SOXX - news) to a near three-year low.
On Thursday, the index fell to 344.9, down 7.0 percent, or 25.74, its lowest level since December 1998. For the year, the index is down some 40 percent. On Wednesday the index shed 7.9 percent after memory-chip maker Micron Technology's Inc.'s $575.5 million quarterly loss soured investors.
Having outpaced the Nasdaq Composite Index (^IXIC - news) by 20 percent for the year through Sept. 11, the semiconductor index has underperformed the Nasdaq by 20 percent since then as hopes for a quick rebound in the industry have faded.
``With the events of the last three weeks and the likelihood that we'll have further revenue revisions downward, the SOXX is now playing catch-up,'' Salomon Smith Barney semiconductor analyst Jonathan Joseph said, referring to the index.
Like many other technology companies, semiconductor makers are still uncertain how much the Sept. 11 attacks on the World Trade Center and the Pentagon (news - web sites) and the overall weakness of the economy will dampen consumer and corporate demand.
``I think the sector will get a better handle of that in several weeks,'' Joseph said.
FORECASTS HEADING SOUTH FOR MONTHS
Forecasts for semiconductor sales growth have been steadily taken down throughout the year, with some market researchers now forecasting precipitous declines.
IC Insights, for one, now believes that global chip sales will fall 34 percent this year, making it easily the industry's worst year.
Before the Sept. 11 attacks, many, including trade group Semiconductor Industry Association, believed that a glut of inventory was clearing out, and would be completed by the end of September. Still, even then, the global chip industry was poised to post its biggest decline.
The previous worst year for the chip industry was 1985, when global semiconductor sales tumbled 17 percent to $21.4 billion from $25.9 billion. In 2000, chip sales were $205.0 billion.
On Sept. 4, the SIA forecast that new digital audio products, as well as sales of PCs, handheld gizmos and communications products, would spur fourth-quarter sales of chips to higher levels than in the third quarter.
But the attacks will likely be enough to push the U.S. economy, already teetering on the edge of recession for the first half of the year, into recession for the latter half of 2001, Standard & Poor's said on Wednesday.
Largely as a result, the global economy will hover near zero growth in the second half of 2001, S&P said.
``There are a lot of moving parts in the sector at the moment, and our assessments of near-term revenue and earnings trends involve a lot of guesswork, both pre- and post-Sept. 11,'' Goldman Sachs chip analyst Terry Ragsdale wrote in a research note to clients on Thursday.
``The hits to consumer and corporate confidence clearly suggest ratcheting down assumptions for the next few quarters,'' Ragsdale said.
Ragsdale cut earnings and revenue estimates for the companies he covers in light of the Sept. 11 attacks and their effect on consumer confidence, and, consequently, the economy.
BIGGEST DECLINERS
Among the largest stock decliners on Thursday was National Semiconductor Corp. (NYSE:NSM - news), which makes analog chips that are often used in cell phones. Its shares were off 12.9 percent, or $2.94, at $19.92.
Texas Instruments Inc. (NYSE:TXN - news), which also makes chips that are used in cell phones, declined by 7.96 percent, or $1.89, to $21.86.
The stock of TriQuint Semiconductor Inc.(Nasdaq:TQNT - news), which makes chips used in cell phones, fiber-optic and satellite telecom equipment, tumbled $2.95, or 17 percent, to $14.56.
The two large companies that make programmable logic devices, which are chips that customers can program themselves, were also lower. Altera Corp. (Nasdaq:ALTR - news). was off 8.6 percent, or $1.40, at $14.99 and Xilinx Inc. (Nasdaq:XLNX - news) was down 6.9 percent, or $1.48, at $20.16.
Intel Corp. (Nasdaq:INTC - news), the No. 1 maker of microprocessors, which are the brains of personal computers, was off 5.0 percent, or $1.05 cents, at $19.85. |
