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

To: Cary Salsberg who wrote (11044)	8/18/2003 5:56:30 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95652

Semiconductor Equipment . . . Kulicke & Soffa was upped to Buy from Hold at American Technology Research. The firm believes that a large Asian back-end service provider has placed a substantial order for 200-300 K&S Maxum wire bonders. Firm raises 2004 est to $0.58 from $0.42. Firm's price target is $11.60. Semiconductors . . . Semiconductor market conditions have improved markedly during the last few weeks and suggest the sector is about to enter "a more accelerated growth phase," according to market research firm Gartner. Global semiconductor sales are expected to reach $173 billion in 2003, up 11 percent over the year-earlier period. Gartner noted that demand for silicon is increasing, wafer fab utilization exceeds 80 percent, wafer pricing has firmed and inventories have returned to normal in device markets. Vishay was upped to Buy at UBS and reiterated its 12-month price target of $16. The firm sees an attractive valuation that offers 22% in potential upside, particularly since the stock recently sold off on the back of Vishay's new $450 mln convertible offering. Also, its balanced product portfolio and end-market exposure offers a more diversified play on the components sector. Pericom Semi upped to Market Outperform from Market Perform at JMP Securities. While the stock is expensive on a P/E basis at148x calendar 2004 earnings of of $0.06, small cap tech investors looking out 18 months may find the stock attractive on a price/book value basis (1.5x book value) and EV/2004 multiple of 1.0x with a cash cushion of almost $6 per share in net cash and no debt. Pericom is an emerging growth analog/mixed signal company focused on high-speed interface logic, clock timing, interconnect, and switching chips for PCs/servers, telecom/networking, and storage systems. Customers include Cisco, IBM, Dell, IBM and China's Huawei. Price target $12. Piper Jaffray analyst Ashok Kumar said a hypothetical acquisition of Broadcom by Intel would represent minimal organizational integration risk With ServerWorks likely to get squeezed out in 2004, Kumar believes BRCM faces a rough road ahead as a stand-alone company. With a market-cap of $6.3 billion, BRCM could be acquired for less than what Intel has spent on its previous communications acquisitions. Piper Jaffray notes that this is a hypothetical analysis and that it has no insight into Intel's acquisition plans. AMD's stock could be poised for upside given in light of September launch of new processors acording to a Barron's article. The tech maven Fred Hickey has been a buyer of AMD shares despite concerns over its balance sheet, the company losing money and cash burn. The article points to the company's dedication to its R&D spending during challenging operating times as a catalyst for the current "buzz" over its offerings. AMD is receiving major support from chip sets and motherboard company's along with behemoth's Microsoft and IBM as well. Hickey cited the "groundwell of support" for Opteron as the reasons for adding his stake to AMD in recent weeks. He even hints to longtime supporter of Intel's chips, Dell Computer as "looking at" its slated to be released on Sept. 23 Athlon64 processors. LSI Logic upped to In-Line at Smith Barney. The upgrade from Underperform is based upon 1) relatively attractive valuation, 2) co's opportunities in enterprise storage and digital consumer products. Firm's price target goes to $11 from $6.50. Firm continues to underweight the semiconductor industry. Semi Comments . . . An important consideration that is brightening the fundamental opinion about chips is that many macroeconomic data points are improving over the last several weeks -- particularly in the United States. 3rd quarter will be tough for many chip companies, but investors seem prepared to look past the near-term and focus upon the "bright, sunlit uplands" (Churchill's words). Stick with Intel as the key sector Outperform, take advantage of trading ranges for Broadcom, Xilinx and LSI Logic, and 'patient' long-term investors should consider Fairchild and IDT. One reason analysts are sticking with Intel is that we are becoming increasingly convinced that Intel's capex will decline from 2003 to 2004, so prospects are improving for sustained improvements in margins and ROIC. Wireless showing improvement, but seasonality is our enemy in about 4 months. Recent checks with TI, Fairchild and others indicate that mobile handset chip orders are showing renewed life. However, believe this is a bit of a game of chicken since 1st quarter is normally the weakest quarter of the year for wireless chip companies. Valuations are high for many well-known names. Stocks with meaningful trading history that are currently valued at least in the top quartile of historical absolute and relative (to the S&P 500) P/E and P/S ranges are Intel, Linear Tech, Analog Devices, National Semiconductor, International Rectifier and Altera. Valuations are more attractive for more problematic companies. Only three stocks with meaningful trading history are below their 10-year median absolute and relative P/S valuations -- those stocks are AMD, Micron and LSI Logic. Among those three, only LSI is interesting at the moment. Increasing industry growth forecasts. Analysts are increasing industry sales growth forecast for 2003 to 10% from 7% (mostly due to currency effects) and 2004 to 14% from 12%. Company-specific models already reflect these changes. The biggest positive revision is to anticipated consumer electronics chip sales growth for 2004, which is increased to 20% from 14%. Anticipate that the next downturn will be 2006 at the latest and gut (which is sizeable) tells us 2005. Forecasting such a long, uninterrupted recovery (the current recovery began at the end of 2001) is fairly generous considering the periodicity of chip cycles has arguably compressed over the last 10 years. There is strong evidence that the chip industry is and has been a single-digit grower. The future's uncertain, the end is always near. There is still a finite chance that this is another tech head fake. Hardware companies are talking about improved customer optimism, but tepid guidance suggests that they are not quite ready to believe it yet. Neither should investors. Notable quote: “The second half of this year will be a seasonal recovery, not a fundamental one. I think the current business environment is still pretty bad. We hope that next year there will be a fundamental recovery.“ Yoon-Woo Lee, CEO of Samsung Electronics' semiconductor operations. RobBlack.com MarketWrap robblack.com