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

To: Return to Sender who wrote (9382)	4/10/2003 7:28:04 PM
From: Return to Sender	Respond to of 95656

Semiconductor Equipment . . . Fahnestock downgrades Novellus to Sell from Neutral based on expectations for cautious 2nd quarter guidance. The firm believes 2nd quarter orders are likely to be down 5-10% sequentially, and thinks their 2nd quarter and 3rd quarter revenue and EPS estimates are too optimistic. The firm believes 2003 EPS may be closer to $0.40 rather than their current $0.59 estimate, and if firm makes such an estimate cut, it would lower the predicted near-term risk for the shares to $18 and the 12-month upside to $28. Semiconductors . . . Lehman believes that the combination of in-line results and in-line guidance by high performance analog companies may not provide enough of a catalyst for valuations to remain at the high-end of their trading ranges. The firm would not be surprised to see some profit taking in these names given their recent out performance (Linear Tech up 19% since Jan 1, Analog Devices +15%, National Semi +11%, Maxim Integrated +8%, versus Philly Semi Index +3% and S&P 500 -2%). The Wall Street Journal reports Microsoft announced its intention of delivering test versions of two operating systems for the much anticipated Hammer microprocessor family from AMD. These AMD chips will be the first which process both 64 bits and 32 bits of data. Recent data points from Microchip, RF Micro Devices and STMicroelectronics suggest that demand during the month of March has been weaker than expected, particularly from the OEM channel. With the exception of microprocessors, which benefited from a richer product mix, industry ASPs deteriorated during the quarter. However, expect the slowdown to impact guidance as opposed to March quarter results for most of our companies. Additional weakness stemmed from continued inventory reductions to below normalized levels, as OEMs prepare for an uncertain demand environment. While the recent conflict with Iraq is a contributor to the more cautious stance adopted by OEMs, do not believe the outbreak of SARs had a material impact on 1st quarter results. The June quarter is an issue. Bottom-up and top-down analyses show sequential growth in the 3% to 4% range, which is slightly above the 2nd quarter 10-year average of 2%. A month ago, considering inventory levels and the low 1st quarter revenue base, we regarded our Q2 industry outlook as conservative, but now see no upside, and perhaps some downside, to our numbers. Investors should prepare to suffer through a nervous April, as stock prices continue to cycle up and down in concert with month-to-month seasonality. Investors have tended to take semiconductor stocks up in line with, or in advance of, end-of-quarter business pickups for the past several quarters. Performance during the weaker first month of the following quarter has not been as good and we would expected to see the pattern repeat in April. Overall, the stance on the sector continues to be neutral. Don't see sufficient valuation or earnings downside to move back to a negative stance, but neither do we see the possibility of any sustained upside. 2020insight.com