Chip results improve, but recovery still elusive
By Duncan Martell
biz.yahoo.com
SAN FRANCISCO, Jan 20 (Reuters) - Quarterly results from U.S. semiconductor companies last week suggest that the beleaguered industry may have turned the corner, but analysts said the question now is when will a solid recovery occur.
Analysts also cautioned that while they are looking to see if chip sales return to healthier levels in the first half or second half of the year, chip stocks are behaving as if the sales increase has already occurred. Shares of most semiconductor companies are now way too high, following a stunning run-up from their lows in October, analysts said.
``There's been so much speculation about what these companies would do that when the good news finally came out, there just weren't many buyers,'' said Doug Lee, an analyst at Banc of America Securities. ``In recent memory I can't think of a better example of the classic 'buy the mystery and sell the history.'''
Indeed, the vast majority of chip companies that reported fourth-quarter results last week topped expectations, albeit expectations that were well below those of a year ago.
? Du Du?ng those that exceeded estimates were No. 1 microchip maker Intel Corp. (NasdaqNM:INTC - news), its chief rival, Advanced Micro Devices Inc. (NYSE:AMD - news), Conexant Systems Inc. (NasdaqNM:CNXT - news), Genesis Microchip Inc. (NasdaqNM:GNSS - news) and Xilinx Inc. (NasdaqNM:XLNX - news).
REVENUE RISING, BUT NOT BY MUCH
More importantly, a number of chipmakers said they expected sales in the current quarter to rise slightly from levels seen in the December quarter. Last year was the worst-ever for chip sales, during which global sales of the devices fell some 30 percent.
Xilinx, which designs custom chips for communications and industrial applications, for instance, expects a bit of an increase. Wim Roelandts, Xilinx president and chief executive, said on a conference call that he expected ``low single-digit sequential growth'' in its fiscal fourth-quarter revenue from the $228 million it had in the third quarter.
Conexant, whose chip products are used in cellular phones, modems, video game consoles and networking equipment, said it expected revenue in its current quarter to be ``up modestly'' over the $229.5 million in the first quarter.
This sort of guidance helps, but not enough.
``At the end of the week the secular issues we had in question before are still there,'' Lee said. "What does the rate of recovery look like?
``So what if these companies beat numbers that were lowered four or five times last year,'' Lee added. ``Do these companies see a sharp recovery in sight? The answer is no.''
OTHER CHIP NEWS SEEN LESS ROSY
Next week brings results from the so-called wireline communications semiconductor companies, which include PMC-Sierra Inc. (NasdaqNM:PMCS - news), Broadcom Corp. (NasdaqNM:BRCM - news), Applied Microcircuits Corp. (NasdaqNM:AMCC - news),and the news there will not be as rosy.
``Most of the inventories in the end markets have been corrected, but that's not the case yet in wireline communications,'' Lee said. ``What this comes down to is we're right in the middle of the process of moving from semiconductor stocks having hit a bottom to what does demand really look like and how much are we going to pay for it.''
Investors may already be making up their minds. Intel, AMD, Genesis Microchip and Elantec (NasdaqNM:ELNT - news) all beat either analyst forecasts or their own and their shares fell the next day, Lee noted.
There was a good deal of speculation toward the end of last year that the chip recovery might well be V-shaped, when depicted on a graph, meaning that it would rise quickly and steadily after hitting bottom. Now, though, proponents of a more gradual, U-shaped recovery are in the majority.
But even that's not a done deal.
``With this relatively small sample of companies just having reported, it's too hard to make that call whether a recovery is V-shaped or U-shaped,'' Lee said.
Intel, for one, did not give investors much to cheer about with its guidance. The largest maker of microprocessors that are the brains of personal computers reported a 77 percent drop in its fourth-quarter earnings, beating both revenue and profit forecasts.
But it also said it did not see any signs yet of an economic recovery and forecast first-quarter revenue of $6.4 billion to $7.0 billion, implying revenue either flat or down as much as 8 percent from the $6.98 billion posted in the fourth quarter.
``Unfortunately, guidance did not reflect expectations of a better-than-seasonal (first quarter),'' Dan Niles, an analyst at Lehman Brothers, wrote in a note following the results.
Revenues of both Intel and Advanced Micro Devices typically fall in the first quarter from the fourth. For Intel, historically that decline has been 3 percent.
AMD also forecast a decline in revenue in the first quarter from the fourth, saying it sees a small loss on sales of about $900 million, down from $952 million in the fourth period.
Beyond the PC sector, there are other big chip companies seeing slight sequential rises, including International Business Machines Corp.'s (NYSE:IBM - news) microelectronics division.
``We expect to see our revenues in the first quarter of 2002 to be above the fourth quarter,'' IBM's Chief Financial Officer John Joyce said during a Thursday conference call to discuss its quarterly results.
It seems to me that RMBS also beat estimates for earnings this quarter but not revenues. Of course that did not keep it from being a big loser this week did it.
Here are the semiconductors I remember that were able to beat expectations so far this quarter. If anyone knows any others please let me know.
finance.yahoo.com
Great tables as usual Don.
Thank you, RtS |
