From Briefing.com: Investors sold equities on Monday. The cautious bias reflect on-going concerns over equity valuation and fears that rising price pressures (e.g.: General Cable (BGC 7.36 -0.13) lowering Q1 guidance due to the sudden rise in aluminum and copper prices over the past few months) may force the Fed to take pre-emptive action to forestall inflation despite anemic job growth.
The S&P (SPX 1147.20 -9.66) lost 0.84%, the Dow (DJI 10529.48 -66.07) fell 0.62% and the Nasdaq Composite (IXIC 2008.78 -38.85) dropped 1.90%.
Tech investors went from mild profit taking in large cap semiconductor shares on Friday to blood letting on Monday ahead of Texas Instrument's (TXN 30.60 -0.87) mid-quarter update. The Philadelphia Semiconductor Index (SOXX 485.27 -18.98) fell 3.76%. There were no advancers. The broader tech sector held up a little better than the SOXX. The Briefing.com Tech Index (BTI) dropped 1.38%. Decliners outnumbered advancers 3.1:1. Decliners shed 3.2% while advancers added 3.0%.
Among today's movers:
Advancers: California Amplifier (CAMP 16.75 +1.90) rose 12.8% on no news; Wind River Systems (WIND 11.31 +1.33) gained 13.3%.
Decliners: Compagnia de Telecomunicaciones de Chile(CTC 13.56 -2.43) slumped 15.2% after the Chile government sought rate rates; Evolving Systems (EVOL 9.40 -3.30) fell 26.0% after reporting Q4 revenue dropped 20.8% Y/Y and guiding in-line; Sigmatron Int'l (SGMA 15.91 -5.65) dropped 26.2% after reporting Q3 net income declined 27.4%.
After the close:
Texas Instruments (TXN 30.60 -0.87) narrowed Q1 guidance to the high end of management's initial guidance. Management projected Q1 EPS of $0.19-0.22 on rev of $2.835-$2.95B vs. consensus at $0.19 on $2.85B. While revised guidance is encouraging, as noted in Q4 review (Story Stocks, January 27, 2004), shares have risen over 22% since we profiled the company in Story Stocks on October 20, 2003. We think upside is limited and would sell into strength and wait until TXN delivers high 20% operating margin and/or for a 15-20% pull-back before initiating a new position.
Triquint Semiconductor(TQNT 8.12 -0.27) raised Q1 EPS guidance to ($0.02-0.01) on $85-$87MM vs. consensus at ($0.02) on $82.6MM. Management indicated bookings and shipments have been very strong so far this quarter, with end market demand remaining strong in most markets.
Tessera Technologies (TSRA 18.50 -0.34) raised Q1 EPS from $0.07 on $11.0-11.5MM to $0.08 on $12.0-12.5MM and vs. consensus at $0.07 on $11.2MM. C04 projected to come in at $0.40-0.45 on $53.0-55.0MM vs. prior guidance of $0.35-0.40 on $50.0-52.5MM, and consensus at $0.38 on $51.6MM.
We remain moderately bullish on tech and continue to advise investors to be selective given the expectations for sustained high revenue growth and operating performance improvements priced into tech names. That said, recent weakness has taken the SOXX components close to their short-term lower volatility bands, suggesting a rebound is due but flow with the market in the morning session.
Please refer to the bottom of the Tech Stocks page for performance by sub-sector.--Ping Yu, Briefing.com
5:49PM Monday After Hours prices levels vs. 4 pm ET: Sellers continue to make their presence known as the S&P futures, at 1145, trade 2 points below fair value, and the Nasdaq 100 futures, at 1439, trade 3 points below fair value. Texas Instruments's (TXN) mid-quarter update has provided no consolation to traders despite being relatively upbeat - profit-taking on small upside moves (such as last week's gains) remains the name of the game.
The below table details Texas Instruments's outlook, as well as the other notable news items of the night.
After Hours Mover % Change Move Reason for Move
Cymer (00C0) +4% Light source supplier for deep ultraviolet photolithography systems raises its Q1 (Mar) sales outlook to up 12-15% sequentially from up 5-10%; Implies Q1 revenues of $81.8-84.0 mln versus the Reuters Research consensus estimate of $79.1 mln; Stock has underperformed the market recently, slipping below its 50 and 200-day moving averages
Foundry Networks (FDRY) -8% Provider of networking solutions takes a hit off comments made during its 16 ET presentation at the Deutsche Bank Securities IT Hardware Conference; General tone of the call was not too inspiring, with management saying it sees 'signs of an improving economy... but it is not booming;' Talk brings rival CSCO down too
Quiksilver (ZQK) unch Teen retailer announces its plan to acquire DC Shoes, a privately-held designer of action sports inspired footwear, apparel, and related accessories; Quiksilver believes that the company will be a nice complement to its surf-inspired Quiksilver and Roxy brands; DC Shoes brought in more than $100 mln in sales last year
Texas Instruments (TXN) -0.4% Semiconductor company sees Q1 (Mar) EPS at $0.19-0.22 and revenues at $2.84-2.95 bln versus the consensus estimates of $0.19 and $2.85 bln, respectively; On its conference call, Texas Instruments says 'visibility continues to improve for Q2 (June);' TXN sold off 3% in today's session and has extended its downward trend tonight
Triquint Semiconductor (TQNT) +2% Mid-cap semiconductor name raises its Q1 (Mar) outlook to gross margins of 32-33%, revenues of $85-87 mln, and a loss per share of $0.01-0.02 - the latter two ranges are at, or above, the Street's forecasts; Management cites 'robust end market demand' and 'strong bookings'
Tomorrow, the market will not have much in the way of economic or earnings-related news to take its cue from with both calendars looking light. Grocers Albertson's (ABS) and Kroger (KR) are some of the larger companies scheduled to report.
For more detail on these, and other developments, be sure to visit our Stock Market Update and Daily Sector Wrap. -- Heather Smith, Briefing.com
4:32PM Texas Instruments sees Q1 rev at $2.84-$2.95 bln; vs consensus $2.85 bln (TXN) 30.60 -0.87: -- Update --
4:31PM Texas Instruments sees Q1 EPS of $0.19-$0.22; vs consensus $0.19 (TXN) 30.60 -0.87: -- Update --
4:31PM Cymer raises Q1 outlook (CYMI) 38.52 -1.41: Co states, "The pace of business in the first quarter is surpassing our previous expectations". Co expect Q1 revenues to increase between 12-15% (previously 5-10%)over 4Q03 revenue of $73.0 mln, or approx $81.8-84.0 mln, Reuters consensus is $79 mln. Additionally, co anticipates that gross margin will be at the highend of the 35-40% range.
3:08PM Texas Instruments: Preview of Mid-Qtr update (TXN) 30.73 -0.74: Texas Instruments is set to provide its Q1 mid-qtr update tonight after the close. Oppenheimer expects co to tighten its Q1 guidance to the high end of its range, to $0.20-$0.22 in EPS and $2.85-$2.95 bln in sales, vs guidance of $0.16-$0.22 and $2.72-$2.95 bln. Firm says analog sales will likely increase by a high-single digit to double-digit percentage in Q1, reflecting the combination of strong demand and an improving pricing environment for standard linear ICs; they expect unit shipments of wireless handset ICs to show better than seasonal strength due to healthy resales of handsets and generally low handset inventories; and they think TXN should benefit from stronger than seasonal sales of consumer electronics as consumers upgrade to digital audio, video, and television equipment. Firm expects higher analog utilization, increased pricing on standard linear and standard logic, and a sequential decline in depreciation charges to allow the co to generate an incremental gross margin above 70% for the qtr.
Cirrus Logic (CRUS) 7.36 -0.13 : After the close, announced that it has named John T. Kurtzweil as Sr VP and CFO effective March 15, 2004. Prior to joining co, Mr. Kurtzweil most recently served as interim CFO at Quepasa Corp. Mr. Kurtzweil also held senior finance roles at Maxtor and Honeywell.
hi/fn (HIFN) 13.26 -0.50 : Before the open, announced it registered 2.2 mln shares for sale by holders.
STMicroelectronics (STM) 25.71 -0.51 : STMicroelectronics (STM 25.71 -0.51): Legg Mason upgraded STMicroelectronics to Buy from Hold, as the stock has declined about 15% from its Jan peak, yet the co is seeing strength across several product segments and they expect gross margin improvements to be the most significant catalyst for the stock. Target is $35.
First Albany upgraded ATML, AMAT, EXAR, KLAC, PLAB and SMTC to Buy from Neutral; firm notes that the SOX index has corrected 10%, yet fundamentals have gotten stronger in the industry throughout Q1; firm expects strong March qtr results and to raise their June qtr ests for most of the co's they follow; firm also continues to hear that device and equipment lead times are stretching, and they think that it will take several quarters to relieve chip supply constraints, and that the device makers are starting to have pricing power for the first time in almost 4 years.
Texas Instruments (TXN) 30.60 -0.87 : Sees Q1 EPS of $0.19-0.22 on rev of $2.84-$2.95 bln; vs consensus at $0.19 on $2.85 bln.
Zarlink Semi (ZL) 3.93 -0.02 : UBS upgraded Neutral to BUY. Target $5.25. Believes co is on track to report in-line Q4 results and that cost-cutting should return co to breakeven by Sept or sooner.
Amkor (AMKR) 14.79 -0.86 : To issue $250 mln in notes.
Novellus (NVLS) 30.68 -0.48 : Novellus (NVLS 30.68 -0.48): Needham upgraded Novellus to Buy from Hold; firm noted that the stock has significantly underperformed comparable large-cap equipment shares over the past year due to mkt share erosion or stagnation in all product segments, yet they believe this has been largely discounted in the stock, and think that improvements in the PVD tool (which has been slow to penetrate the mkt) may result in promising penetration of the copper barrier/seed deposition mkt. Target is $38.
Varian Semi (VSEA 39.69 -1.16): CIBC upgraded Varian Semi to Sector Performer from Sector Underperformer. The firm believes a 20% pullback provides an attractive near-term trading opportunity within an extendable cycle still in its early stages. While the valuation remains at a premium to its immediate peer group (noteworthy, ACLS P/E is 35% lower), the firm's earlier concerns are diluted by what a better outlook for revenues and for margins -- on mix, volume, and manufacturing efficiencies.
9:33AM IPO Briefing - SMI : China's largest chip-maker, Semiconductor Manufacturing Intl Corp (SMI), is being listed globally on the New York Stock Exchange as an ADR to begin trading on March 17th, along with Hong Kong the following day. The IPO could raise as much as HK$14 bln or $1.8 bln.
What It Means:
Semiconductor Manufacturing's initial public offering will be the third largest this year. The company offered 4.545 billion shares that could be priced anywhere between USD$15.50- $17.50 per share, totalling roughly USD$1.8 bln! Each ADR is worth 50 ordinary shares. The funds will be used to build out capacity more than tripling its silicon wafer output to over 170,000 per month by 2005. Proceeds will also be used for building a new 12-inch fab in Beijing.
With Chinese stocks up two fold, the expectations were high from a share demand point of view from institutional and retail clients interested in the deal. Deutsche Bank and Credit Suisse First Boston, the joint book runners arranging the sale, reported the offering is now six times over subscribed. This means the order book for shares is 6x the current supply. This type of "hot" deal typically spells extreme returns and volatility in the first few days of trading.
Competitors (%YTD, P/E): Taiwan Semiconductor (TSM $11.20 +9.38%, 19.8x), Intel (INTC $29.05 -9.67%, 23.4x), United Microelectronics (UMC $5.77 +16.57%, 25.9x), and Texas Instruments (TXN $31.47 +7.11%, 33.1x).
Index Performance YTD: Hang Seng +7% and Shanghai Stock Price Index +8%.
The IPO is currently priced around 2x book value in-line with UMC and half that of TSMC. After the successful launch of China Life Insurance (LFC) and Ctrip.com Intl (CTRP), SMI will no doubt be a hot stock. But, if investors are looking to gain exposure to the fastest growing economy in the world, one suggestion would be to look into mutual funds or exchange traded funds instead of trading individual stocks which are typically quite volatile. These types of instruments offer more diversification and less risk.--Kimberly DuBord, Briefing.com
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