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

To: robert b furman who wrote (9339)	4/8/2003 10:31:54 PM
From: Return to Sender	Respond to of 95622

EMS . . . UBS believes that much like the rest of the EMS sector, Celestica's results and guidance on April 15 will indicate pricing pressure and weak end markets during 1st quarter and continuing into 2nd quarter. Storage . . . EMC expects 1st quarter EPS to be "at least" $0.01 on $1.35-$1.4 billion in revenues versus consensus of $0.01 and $1.38 billion. Network Equipment . . . Riverstone kicked off the annual product announcement season leading into Networld+Interop with the launch of their XGS switch line. This product significantly lowers the cost of 10 Gigabit switching, hitting a price point roughly 41% below the previous price leader. Unquestionably, we believe the price point for the product is quite attractive. Analysts question, however, how large this market will be initially as our recent CIO survey revealed that customers believe they have meaningful excess capacity currently. Furthermore, applications like VoIP and new CRM, which would drive capacity needs are being deferred. Thus, still believe that the market is likely to be limited initially to early adopters like defense, higher education, and scientific research industries. 10 Gigabit Priced A Bit Under $10,000 Per Port. Riverstone launched two products in the XGS platform, the 9016 and 9008. The 9008 is a 12-slot chassis with 8 dedicated line card slots, while the 9016 is a 22-slot chassis with 16 dedicated line card slots. On a cost per port basis, the products are selling $9,995. This compares to a price of approximately $17,000 for previous price leader Force10. The prices for Foundry and Cisco were over $40,000. The company attributes its significantly better performance to lower-cost optics, denser ASICs, and a custom design specialized for 10 Gig. Semiconductor Equipment . . . Semiconductor equipment sales totaled $18.5 billion in 2002 according to Gartner, down 30 percent from year-earlier levels due to slower-than-anticipated end user demand and an increase in macroeconomic uncertainty. Global wafer fab equipment sales declined 32 percent to $16.53 billion. Semiconductor . . . UBS Warburg LLC analyst Alex Gauna said he overestimated Marvell Technology Group’s, a maker of chips for computer- disk drives and network switches, growth potential and underestimated competition from Intel. He cut his recommendation to ``reduce'' from ``neutral.'' UBS Warburg raised Broadcom to neutral from reduce, saying "we believe Broadcom continues to make steady progress in ramping new business opportunities such as DOCSIS 2.0 cable modem, ADSL broadband access... the key longer-term issue for Broadcom is whether these emerging areas will prove robust enough to offset competitive issues facing Broadcom's Gigabit Ethernet and Server System I/O product lines." A Sterling analyst believes the recent Broadcom turmoil to be an incremental positive for Marvell Tech. The analyst highlighted recent departures by key senior executives within the company's Serverworks division as signaling internal "turmoil" and suggests vulnerabilities within key product areas for BRCM such as cable modems, DSL and WLAN in light of MRVL's internal development. Ross Seymore at Deutsche Bank said that while RF Micro's warnings was "clearly a negative," he believes Intersil and Agere are "relatively less vulnerable" to pricing pressures due to a more favorable product mix. Semis & War . . . The biggest open question at the moment is the possible effect that war worries are having upon demand. There are tentative, cautionary data points in the networking equipment end-market and the PC supply chain (e.g., mobos and processors), but other indications are more unwavering (e.g., PC OEMs, analog IC and wireless chip suppliers). At least one chip company, Microchip, has blamed the war (among other things) for its recent shortfall. Although STMicro received order push-outs at the end of March, the company was somewhat more reluctant to blame war uncertainties. In fact, Texas Instruments CEO Tom Engibous gave a relatively upbeat industry outlook at an industry conference on Wednesday, April 2nd, where he explicitly rejected the idea of a 'war effect'. Here are some excerpts from an EE Times article covering the presentation and a link to the full text: Engibous said the war in Iraq and economic uncertainties have caused "no change in the current business environment." He continued: "It is fair to say from a macroeconomic point of view that corporations are in a spending freeze, with no major investment decisions about IT spending being made. To the degree that business gets moving as we put this war behind us going forward, that will be a plus. It is consumer spending that has been relatively healthy." (http://www.eetimes.com/semi/news/OEG20030403S0036) Both STMicro and TI cited consumer electronics as an area of relative strength. Perhaps a little perversely, it has also been argued that SARS might cause a bit of a 'nesting' effect for consumers. In any case, it is probably fair to argue that if recent exogenous effects continue or worsen (e.g.., war worries weighing upon weaker seasonality), 2nd quarter estimates for chip companies will be increasingly at risk. Symmetrically, if war concerns dissipate, 2nd quarter estimates are likely achievable. 2020insight.com