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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: w0z who wrote (6946)	11/19/2002 8:55:47 AM
From: Return to Sender	Read Replies (1) \| Respond to of 95596

From Briefing.com: EMC EMC Corp CEO sees no signs of IT pick-up yet --Reuters (6.74). Reuters reports that co's CEO told reporters in Tokyo that he saw no signs yet of a pick-up in corporate spending on information technology. "There are no real tangible signs that it's improving. There's a lot of conventional wisdom that believes it could improve some time in later 2003, but we'll see." Fechtor on wireless Research firm Fechtor Detwiler says that it sees a handset inventory build-up in North America with manufacturers offering subsidies in response; also says that there is no retail premium left on added handset functionality. AMD Advanced Micro trades lower on convertible offering (6.52) Hearing that Salomon Smith Barney will be doing a $300 mln AMD convertible offering, with notes due in 2007. GNSS Genesis Microchip downgraded by RBC (17.60) RBC Capital Markets downgrades to UNDERPERFORM from Sector Perform; cites uncertainty as to where ASP declines will level off, the impact of potential new entrants, and the fact that stock is above its $16 target. 7:56AM Microsoft downgraded at Raymond James on valuation (MSFT) 55.85: Raymond James downgrades to Mkt Perform from Outperform due to valuation; at current prices, firm believes continued upside potential may be limited by the following factors that could pressure on MSFT's earnings outlook for the coming year: continued tough IT spending environment, slow PC growth, and a lack of major new product releases in FY03; in addition, firm notes that mgmt is not currently receptive to a dividend. Sees fair value at $55. 7:45AM Texas Instruments: wireless strength to be offset by weakness in other units - BofA (TXN) 17.00: Banc of America says that following a meeting with TXN mgmt, they do not foresee material upside to their Q4 ests, which call for an overall sales decline of 9% and EPS of $0.02; wireless sales are evidently on pace for another qtr of high-single-digit growth in Q4, yet weakness in other areas (e.g. ASICs) and a seasonal decline in the calculator biz should more than offset the strength in wireless. Firm also says they are hesitant to aggressively recommend the stock at roughly 60x 2003 EPS est. 7:38AM CSFB cuts sector rating for wireless equipment to Underweight : CSFB lowers their sector rating on the wireless equipment group to Underweight from Marketweight, citing increased competition from Asian brands, tough comps next year, continuing weakness in infrastructure spending, and the belief that valuations already reflect Q4 seasonality. 7:03AM General Electric: analysts see $1-$2 bln charge - WSJ (GE) 23.60: The Wall Street Journal reports that a number of analysts says GE may announce a substantial charge in the neighborhood of $1-$2 bln during an investor meeting Thursday; charge could be used to boost reserves in GE's struggling Employers Reinsurance Corp unit and for restructuring efforts at units such as aircraft engines, which are facing rocky times; several analysts are also forecasting that GE might have to infuse anywhere from $2-$5 bln of equity into GE Capital to help preserve the unit's triple-A debt rating. 6:59AM Intersil cut to Hold at UBS (ISIL) 19.86: UBS Warburg downgrades to HOLD from Buy based on an array of potentially destabilizing uncertainties facing the company exiting 2002. Among these concerns are the potential for seasonal MarQ softness and Broadcom's early lead design wins for next-gen 802.11g solution. finance.yahoo.com^SOXX+ALTR+AMAT+AMD+BRCM+EMC+GE+GNSS+INTC+ISIL+KLAC+LLTC+LSCC+LSI+MOT+MSFT+MU+MXIM+NSM+NVLS+TER+TXN+XLNX+^VIX+^IXIC+^SPX+SMH&d=t RtS

To: w0z who wrote (6946)	11/19/2002 9:04:52 AM
From: Alastair McIntosh	Read Replies (1) \| Respond to of 95596

Wireless Communications - Assessing the Global Wireless Handset Supply Chain • Inventory inline with history, but should be lower. Although inventory levels remain roughly inline with the historical average, we believe they should be lower due to lower end-market growth rates and the reduced lead- and cycle-times. Thus, we believe there is the potential for a contraction in weeks of inventory carried. However, given the market-share focus and expanding ODM channel, we do not see near-term risk of an inventory contraction unless we see weak 4Q sell through. • Asia Update: Builds happening. Based on our recent trip through Asia last week, the supply chain suggests the industry continued to build handsets through October into November. Given the combination of short lead/cycle times, hub-inventory management, and a less than robust consumer outlook, we expected a more cautious approach to builds. This makes 4Q consumption even more critical. • Handset Demand in Line to Date. Supply chain data points have remained positive, and our end-market analysis suggests 3Q02 handset demand was inline to slightly better than expectations (109M). Our analysis indicates we entered 3Q02 with modest carrier channel inventory and we have seen little signs of build during the quarter. We are not concerned about the potential of a major channel inventory build in Q4:02 given the carrier and distributor focus on cash flow. • Pricing pressure > ‘03 unit growth. We estimate ‘03 component demand to be 465M handsets (assuming no EOY excess inventory), up from 433M in ‘02. However, supply chain datapoints suggest continued price erosion (down 20%+ y/y) will outweigh unit growth (7%). Thus, we would focus on companies with (1) market share gains, (2) new phone ramps and (3) exposure to the growing outsourcing market. • “Profitless Prosperity” overhangs component stocks. We believe we are seeing a decoupling between inventory fundamentals and stock prices (now 43% vs. 73% in March) due to: (1) increasingly non-existing hardware barriers, (2) component overcapacity, (3) strong balance sheets leading to price competition and product overlap, and (4) weak (5-7% CAGR) unit growth rates. We believe this “profitless prosperity” environment for the wireless component sector will continue into '03.

To: w0z who wrote (6946)	11/19/2002 9:12:50 AM
From: Alastair McIntosh	Respond to of 95596

Asia Concerns, Fundamentals Peaking; Lowering Rating • Lowering Rating: We are taking a more cautious view on the stocks in the US Wireless Equipment Universe. We believe current stock prices reflect the strong seasonality of Q4, and are lowering our sector rating to Underweight from Marketweight • Asian Vendors for Real: Korean, Japanese, and Chinese brands have gained four points of market share in each of the last two years. We believe falling technology barriers have aided these gains. We believe these trends will be a negative because (a) Asian vendors will continue to gain share; (b) prices will ultimately come under pressure; and (c) the pace of consolidation may be stalled. In our base case, Asian OEMs will grow by 18% through 2005, with Western brands growing by 3%. • Tough Comparisons Next Year: We believe the market is underestimating how strong handset fundamentals are this year. Industry growth of 10%, flattish ASPs, and average operating margins of 12% in 2002 are all up significantly from last year. We believe comparisons will be tough for ‘03. • Infrastructure Still Getting Weaker. We continue to see capex cuts in the US and Europe. We had expected that new network construction in China in 2H:03 could return the sector to growth. However, recent indications are that the 3G builds in China will not start until 2004, at the earliest. • Seasonal Trade Nearing an End: Wireless Equipment group has appreciated by 11% in the last two months, with the large cap stocks up 21%, well above NASDAQ (up 9%) and the S&P500 (up 2%). We believe most of the stocks are embedding growth rates higher than our industry views. • No Change to Relative Ratings: Our relative ratings and price targets within the US Wireless Equipment universe remain unchanged. We continue to see the most upside potential in Motorola (MOT, $9.5, O, TP $11) and Nokia (NOK, $18.6, O, TP $19), and are cautious on Qualcomm (QCOM, $39.1, U, TP $27) and Ericsson (ERICD, $10.4, U, TP $5).