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To: Proud_Infidel who wrote (5078)	7/23/2004 8:14:19 AM
From: Proud_Infidel	Read Replies (2) \| Respond to of 5867

UPDATE - STMicro plays down chip sector slowdown concerns Thursday July 22, 6:13 am ET By Gilles Castonguay and Astrid Wendlandt (Adds background, details, market reaction) MILAN/PARIS, July 22 (Reuters) - Europe's top chipmaker STMicroelectronics (Paris:STM.PA - News) on Thursday played down concerns over a softening of demand in the semiconductor industry, saying it did not expect widespread overcapacity next year. The Franco-Italian company also forecast global chip sales would rise 14 percent in 2005, near the top of market expectations. The positive outlook from the maker of chips for autos, computers, mobile phones, digital cameras and other applications came amid concern about a gradual slowdown in the semiconductor industry. Chief Executive Pasquale Pistorio, speaking after STMicro late on Wednesday posted a near doubling of second-quarter earnings, said the company was seeing strong demand for chips due to new technologies such as in mobile phones and broadband Internet access. "We don't see yet a situation of widespread overcapacity developing next year," Pistorio told a news conference. STMicro said it was on track to increase its gross margin, a closely watched indicator of profit trends, to 40 percent in the fourth quarter. At 0936 GMT, STMicro shares were off 2.3 percent at 16.06 euros, outperforming the DJ Stoxx European tech index (Zurich:^SX8P - News), which was 3.1 percent lower. "Research houses are forecasting anything from a 5 percent decline to a 12 percent rise in sales for the semiconductor industry next year," said Jerome Ramel, an analyst at KBC Securities in Brussels. "So this means there is no consensus for next year." NO CONSENSUS Global chip sales are expected to rise by between 25 percent and 30 percent this year. But Intel (NasdaqNM:INTC - News), the world's largest chipmaker, last week revealed an unexpected rise in inventories of unsold chips in the second quarter and forecast lower-than-expected margins for the second half. Merrill Lynch has cut its 2005 sales growth estimate for the semiconductor sector from 16 percent to 6 percent, arguing that it did not "see the inventory rebuild needed to support" the previous estimate. On Wednesday, STMicro reported a rise in second-quarter earnings per share to 16 cents from 9 cents, in line with market expectations. But some analysts said the outcome had been flattered by non-operating items such as lower-than-expected finance and restructuring charges. "This means that in operating terms, the numbers are worse than expected," said Andrew Griffin, head of European semiconductor research at Merrill Lynch in London. Profit before income taxes and minority interests rose to $172 million from $98 million, while revenue increased to $2.17 billion from $1.7 billion in the three months to June 28. The company said second-quarter revenues were within its guidance range but "could have been higher, had it not been for some order push-outs in the computer peripherals market and short-term testing bottlenecks affecting our ability to ship certain products". Gross margin in the quarter rose to 37.4 percent from 35.7 percent a year ago.