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

To: Return to Sender who wrote (10767)	7/31/2003 5:59:09 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95480

Semiconductors . . . Merrill Lynch analyst Joe Osha upgraded a number of semiconductor stocks amid a more positive stance on the sector globally, as he sees earnings estimates unlikely to fall, revenue momentum improving and low inventory levels. The firm believes that unlike mid 2002, earnings estimates are reasonable or even conservative; and with earnings estimates unlikely to fall, revenue growth momentum improving into 4th quarter, and the supply chain showing very low inventory levels. The firm believes that the stage is set for growth in earnings into 2004 aided by an inventory snap back as lead times lengthen. He upgraded Intersil, Linear Technology, Maxim Integrated Products, Microchip Technology, Semtech and National Semiconductor to "buy" from "neutral." Intel was already rated a "buy." Osha left his ratings on European chip stocks unchanged, however, as further strengthening of the euro represents a risk to earnings estimates. Broadcom downgraded at Wachovia to Market Perform from Outperform. The company's core business continues to achieve solid growth, checks indicate BRCM should experience considerable weakness in its server rev in 2nd half 2004. Also, while firm remains impressed with BRCM's emerging products, this segment's growth may not be sufficient to make up their previous server revenue contribution; sees valuation range of $19-$24. GlobeSpan Virata started with a Buy at Adams Harkness. The firm also gives it a $9-$10 target range. The firm says the DSL market remains a bright spot in the telecom market, and they do not feel that the discount is warranted. The DSL market is again exhibiting strong growth dynamics, driven by healthy demand in Asia and Europe, and regulatory relief in the U.S. market for broadband services should be a major catalyst for increased carrier spending. Texas Instruments bought privately held Radia Communications, based in Sunnyvale, Calif., for an undisclosed amount. Radia specializes in designing chips for 802.11 wireless local area networks. The two companies have worked together in the past. Analysts are incrementally more positive on prospects for Intersil’s power management business in 2004. Intel’s introduction and the subsequent transition to the 90nm process technology node is a catalyst for Intersil. The move on the part of Intel to 90nm with its Prescott Pentium 4 microprocessor, which is sampling now and expected to go into volume production by 4th quarter 03, is very likely to result in faster processors that consume higher levels of current. Power management now comprises nearly 50% of Intersil’s revenues following its exit of the WLAN business. Nearly half of power management is in desktop power applications, where Intersil is a leading supplier of PWM (pulse width modulation) controllers and FET (field effect transistor) drivers. The transition to higher speed 90nm microprocessors is likely to cause a significant mix shift from 3-phase power to 4-phase power controllers, which handle higher current levels. This could improve ASPs for Intersil’s PWM business and should also result in increased unit demand for the company’s FET drivers. Analysts are raising 2004 estimates from $0.86 to $0.93. Intersil’s power management business could potentially see near term inventory issues following its strong June Quarter. The stock has retreated 23% from recent highs. Boxmakers . . . Cray reported earnings of $7.9 million, or 10 cents per share, well above its year-ago profit of $1.2 million, or 2 cents per share. The company said the latest results benefited from the deferral of $6 million in revenue from the first quarter, but the impact on earnings wasn't quantified. Analysts were looking for a profit of four cents per share in the period, on average. Revenue soared in the latest three months to $61.8 million from $38.6 million in the same period a year earlier. Cray noted product margins got a lift in the June period from higher volumes, lower component costs, and improved yields. Looking ahead, Cray left intact its outlook for revenue of at least $220 million in 2003. Motorola hosted a cautiously optimistic analyst day yesterday in Chicago. After a disappointing first half, the company continues to expect a sequential revenue rebound in the second half on the back of a rebound in Asia/China and new product introductions from segments such as PCS (handsets). Checks indicate that business trends in July including handsets and semis have been in line with guidance, with China being the strongest, while Europe remains soft. On the margin side, Motorola appears focused on enhancing its profitability in all segments through continued restructuring and internal corporate initiatives like Digital Six Sigma and improved procurement systems. While the company has done an admirable job in shoring up its balance sheet and returning to profitability over the past few years, remain cautious about the growing competitive pressure in wireless handsets and infrastructure, as well as in some semiconductor segments that might limit Motorola’s ability to post a significant earnings recovery. Although Motorola’s valuation appears to be only slightly aggressive based on our DCF analysis (discounting 8% revenue growth over the next ten years using 10% operating margins, 4% terminal growth, and 10% WACC), need to see some stronger signs of recovery in the overall business and less uncertainty about the wireless infrastructure segment’s future in order to become more positive. RobBlack.com MarketWrap: robblack.com