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Strategies & Market Trends : Guidance and Visibility -- Ignore unavailable to you. Want to Upgrade?

To: Jerry Olson who wrote (29657)	11/9/2001 9:04:57 AM
From: 2MAR$	Read Replies (2) \| Respond to of 208838

PALO ALTO, Calif. (Dow Jones)When Wall Street noticed last week that semiconductor sales slowed their sevenmonth tumble in September, hopeful investors seized the data as evidence of a strong holiday sales season for PCs. If this year's Christmas could come in better than expected, then perhaps the industry was poised for a rebound from one of its worst periods on record. Not lost on skeptical observers was that September business suffered and survived the disruption of the terrorist attacks in New York and Washington. But the positive scenario may be more a mirage rather than a clear sign of a changing market. The assumption now gaining favor is that many PC manufacturers ordered holiday season chips and other components earlier than normal because of Microsoft's (MSFT) launch of its new Windows XP operating system. Also driving the buying was the rapid launch of Intel Corp.'s (INTC) new Pentium 4 microprocessors. PC makers wanted to be prepared with plenty of machines when Microsoft's latest desktop operating system began shipping on Oct. 25. And they wanted those machines to run Intel's latest chip, which they viewed as more attractive to consumers than the Pentium III. The normal November rush to build PCs in time for Christmas does appear to have taken place in October this year, one month early, says Rob Herb, executive vice president at chip maker Advanced Micro Devices. There has been "some momentum building" for Windows XP, Herb said during an analysts meeting Thursday. The unintended result may be a slower than normal November, and mounting pressures on the stocks of chip and PC makers, which have advanced strongly over the past several weeks. Some analysts have begun to anticipate a rough period ahead. For instance, Bank of America Securities analyst Douglas Lee said in a research note this week that "current valuations leave little on the table for investors." Cautioning that the industry will grow at a 3% pace next year, he wrote that the "overall semiconductor group is not particularly compelling for new investment at current levels." His colleague, analyst Mark FitzGerald also weighed in. "We do not see the current rally in semiconductor stocks as sustainable until a broadbased recovery is underway for PCs, cell phones and other informationtechnology equipment," FitzGerald said in a research report. The data on such a recovery are not yet convincing. When the Semiconductor Industry Association reported on Nov. 1 that September sales slid 2.5% from August, it pointed to an improvement from the August drop of 3.5%. However, September sales in the past 20 years have typically risen more than 1%, making the period still look weak. PC sales in the fourth quarter may be up from the third quarter, but for the year are still expected to be down 5% or so from 2000. Stocks of companies such as Intel, Dell Computer Corp. (DELL), National Semiconductor Corp. (NSM), Advanced Micro Devices Inc. (AMD), LSI Logic Corp. (LSI), Altera Corp. (ALTR), Applied Materials Inc. (AMAT), Novellus Systems Inc. (NVLS) and Gateway Inc. (GTW) have benefited from the recent rally. By Mark Boslet, Dow Jones Newswires, 6504961366; mark.boslet@dowjones.com (END) DOW JONES NEWS 110901