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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (5020)	1/18/2003 11:45:01 AM
From: Proud_Infidel	Read Replies (1) \| Respond to of 25522

Chip Gear Makers Should Take Intel's Forecasts With A Grain Of Salt BY JAMES DETAR INVESTOR'S BUSINESS DAILY Semiconductor equipment makers got a bit of a shock last week. Intel Corp. (INTC) announced plans to cut capital spending by about $1 billion this year vs. 2002. The overall economy's still sluggish, the company says. So it sees no reason to spend $4.7 billion on new plants and gear, as it did in 2002. Instead, Intel plans to spend $3.7 billion. Intel is the world's biggest chipmaker. Where Intel goes, the market usually follows. So if Intel's cutting back, that's generally not a good sign for gear makers. But Intel also has a terrible track record when it comes to forecasting spending. It will likely be off the mark this year, too, experts say. At least one analyst thinks Intel could wind up spending more on gear this year than it did in 2002. Intel generally is conservative in its forecasts. So if there's a change in plans, it's likely to be on the upside. "What we're really trying to do is manage the company very cautiously," said Chief Financial Officer Andy Bryant when he reported fourth-quarter earnings on Jan. 14. "You know, keep head count flat to down and keep spending flat to down." The day after Intel put out its numbers, South Korea's Samsung Group said its chip division plans to boost spending on new factories and gear. investors.com Samsung could for the first time outspend Intel. It plans to spend $4.2 billion in 2003. That's up 39% from $3 billion in 2002. Samsung is the biggest memory chipmaker. And with $8.73 billion in chip sales in 2002, it's the No. 2 chipmaker overall, according to a recent IC Insights report. Although it's still a bellwether, Intel's forecast doesn't carry the weight it once did. So says UBS Warburg analyst Byron Walker, who covers the chip equipment industry. Walker doesn't cover Intel, but UBS does hold Intel stock. "Intel is historically poor at forecasting its year-ahead actual capital spending. But it's good at forecasting the direction of year-over-year declines," Walker said. Walker notes that it's not just Intel. It's hard for anyone to predict what electronic devices will be hot six months or a year from now. So chipmakers have a tough time forecasting sales. "What's different is Intel is usually the first one to come out with its numbers, and it's the only company of its size," Walker said. With $26.8 billion in 2002 revenue, Intel is far and away the largest chipmaker. Its spending accounts for up to 17% of all capital spending every year. The situation's only going to get worse, says Rick Whittington, an analyst at Greenwich, Conn.-based American Technology Research, which doesn't own any Intel stock. In the old days, most of Intel's chips went to U.S. personal computer makers. But more chip manufacturing is going overseas to China and other parts of Asia. As a result, Intel is losing its ability to accurately forecast future sales. "It's going to get worse than it has been," Whittington said. "Even when it was just Compaq, IBM (IBM), Gateway (GTW) and Dell (DELL), it was hard for Intel to forecast." Today, Intel has a smaller number of those big-name customers. And it sells to a growing number of small Asian distributors and computer makers. Intel is changing with the times. It plans to begin assembling chips in China this year. The company will make Pentium 4 processors at a newly upgraded $500 million plant in Shanghai. Whittington says there's not a lot Intel or anyone else can do to fix the poor forecasting trend. "If the U.S. government can't figure out that terrorists are going to fly into the World Trade Center, how can Intel - which deals with disparate geographies and distinct cultures - size up near-term sales?" he said. One positive is that Intel has shifted its capital spending, according to U.S. Bancorp Piper Jaffray senior analyst Greg Konezny. U.S. Bancorp trades Intel stock. Konezny does not cover Intel, but covers equipment companies. "If you look at Intel's capital spending in 2001 and '02, a lot of it had to do with setting up the factory buildings for 300-millimeter (chip wafer diameter) plants," Konezny said. "Those investments are essentially done. Now it has to fill those with tools." As a result, Intel could wind up spending less on factory space this year vs. 2002, he says. But it could spend more on equipment. Lam Research Corp. (LRCX) will be the first large equipment company to report results. It will release numbers on Jan. 24. Applied Materials Inc. (AMAT), the biggest gear maker, will report on Feb. 12. investors.com