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

To: Alastair McIntosh who wrote (10910)	8/8/2003 7:37:01 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95837

Semiconductors . . . Broadcom will pay Intel $60 million to settle all outstanding litigation between the companies. Broadcom will take a $60 million charge in the quarter ending June for the payment. As part of the agreement, all outstanding patent claims and counterclaims will be dismissed with prejudice. The companies also entered into cross-license agreements on patents owned or controlled by either company. Nvidia reported results that were able to top Wall Street's consensus view as a lower tax rate offset margin deterioration. But the company also offered a third-quarter sales forecast that fell short of current analysts' expectations. Nvidia anticipates revenue of $482.8 million to $487.4 million for the third quarter, below the estimate of $496 million. For the October quarter, NVIDIA guided for a 5-6% increase in revenue – or about $485 million – below consensus estimates of $490 million and $495 million respectively. Margins continue to be a concern as the company guided for “flat to slightly down” margins, due to increasingly higher percentage of GeForce FX products. Margins will continue to be under pressure in the January quarter as NVIDIA continues to ramp FX products based on 0.13-micron technology, where it is behind in achieving cost targets. The company indicated that the price per transistor for 0.13-micron has yet to cross over with 0.15-micron, resulting in a cost premium. It also noted that if yield rates on 0.13-micron improve, TSMC is likely to pass on some of the cost savings to NVIDIA, which leads us to believe that the disappointing margin trend is at least partly due to yield rates at TSMC. Adjusting revenue estimate for the October quarter, which implies Quarter over Quarter growth of 6.6% Quarter over Quarter. NVIDIA’s revenue guidance is probably reflective of the company’s opinion that it does not expect much growth in their core business even in what is a seasonally strong quarter for PCs. Model assumes a 5.1% Quarter over Quarter increase in PC-related revenues, and a 12.8% Quarter over Quarter increase in Xbox revenues. NVIDIA was downgraded at Thomas Weisel to Peer Perform from Outperform after the company cut 3rd quartre guidance. The firm cited the following factors: 1) concerns regarding growth in the co's core (non-Xbox) business, 2) inventory growth in excess of anticipated rev growth, 3) uncertainty regarding the timing and likelihood of recapturing lost mkt share and of gross margin improvement, and 4) significantly lowered EPS ests. ATI Tech target raised to $14 at SoundView. The firm believes the market will progressively assign a multiple premium on ATYT vs NVIDIA over the next few quarters given NVDA's continued cost issues and poor gross margin outlook. Boxmakers . . . While Dell's execution remains unrivaled, periods of rising component prices are not ideal for the business model. Approximately one half of Dell's cost advantage comes from superior inventory turns and lack of exposure to channel inventory during periods of declining component prices. When the aggregate bill of materials is flat, as it was during fiscal 2nd quarter, Dell's cost advantage relative to Hewlett, IBM and other less efficient competitors declines. Flat aggregate component prices would not be as much of a near-term issue if they were a reflection of stronger demand, but there is little evidence to support this. By all accounts, Europe remains challenging and only a few portions of Dell's largest market (the U.S.) are showing slight signs of slightly better demand, namely small to mid-sized business and consumer. Instead, we attribute recent component price stability to other factors. Desktop microprocessors are not declining at historical rates because Intel is reducing die size more slowly and/or allowing more cost savings to fall to the bottom line. Hard disk drives are not declining because the industry has now removed as many platters and nearly as many heads as possible from a desktop drive; yield problems and strong laptop demand have caused portable drives prices to actually rise during calendaer 2nd quarter. DRAM prices are rising because of the on-going transition to DDR400. Finally, increasing substitution of flat panel displays for CRT displays is causing a near-term supply/demand imbalance in this market. RobBlack.com MarketWrap robblack.com Great stuff Alastair. I think that a lot of the good economic numbers that have come out this year can be attributed to the high levels of defense spending. It's going to be tough to expect a tremendous recovery with oil prices back up so high again but I am still willing to admit I cannot foresee the future. Anything is possible. RtS