Prudential Upgrades Chip Sector on Share Prices, Inventories
2006-06-09 12:04 (New York)

By Steven Bodzin
     June 9 (Bloomberg) -- The semiconductor sector was upgraded
to ``favorable'' from ``unfavorable'' by Mark Lipacis of
Prudential Equity Group Inc., citing reduced inventories and
attractive share prices.
     In the quarter ended March 2006, inventory days reached
their lowest ever for a March quarter at companies that make
chips for personal computers, communications infrastructure, and
telephone handsets, the San Francisco-based analyst said.
     He also said manufacturing utilization rates for the sector
were at 90 percent, below the peak levels of 95 percent to 97
percent during the peak cycles of March 2000 and March 2004.
     ``At these levels, it is difficult for us to imagine the
supply chain double ordering and building inventories in a broad-
based and material manner.'' Lipacis wrote in a note.
     He also said chip shares were ``attractive'' because they
traded at a 12-percent discount to 2007 earnings on average.
     He recommended Advanced Micro Devices Inc., the second-
largest maker of computer processors; Broadcom Corp., which makes
computer chips for cable set-top boxes; Marvell Technology Group
Ltd., which makes hard-drive controller chips used in half the
world's notebook computers; and Microchip Technology Inc.
     Lipacis also recommended Texas Instruments Inc., which
raised its second-quarter revenue and profit forecasts yesterday,
based on higher sales of phones in India and China.
     The world's biggest mobile-phone chipmaker bucked the trend
of rising chip stocks, falling 57 cents to $30.15 at 11:38 a.m.
in New York Composite trading.
     Advanced Micro shares rose 32 cents to $27.35, Broadcom
gained 40 cents to $30.38, Marvell climbed $1.35 to $48.41, and
Microchip advanced 69 cents to $33.56.
     Lipacis remained ``underweight'' in shares of Intel Corp,
the world's biggest computer-chip maker. Intel gained 9 cents to
$17.20.
     The Philadelphia Semiconductor Index rose for the first day
in six, gaining 1.3 percent to 452.72.

--Editor: Wan.

Story illustration: For a comparison of how semiconductor stocks
compare to one another, click {SOX <Index> MRR <Go>}.

To contact the reporter on this story:
Steven Bodzin in New York at (1) (212) 617-8138
sbodzin@bloomberg.net

To contact the editor responsible for this story:
John Melloy at (1)(212) 617-2179 or jmelloy@bloomberg.net.

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AMD US <Equity> CN
BRCM US <Equity> CN
MCHP US <Equity> CN
MRVL US <Equity> CN
TXN US <Equity> CN
INTC US <Equity> CN

NI ANA
NI US
NI CA
NI TX
NI COS
NI SEM
NI CPR
NI TEK
NI CALLOFDAY

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