Semi-related news.
GM, I wonder if Germany has heard that "France would soon be taking over." -g- (this from last sentence of 2nd article). Oops, scratch that comment, he meant it differently than I first thought. ts
S&P may cut Motorola Inc <MOT.N> debt ratings
NEW YORK, March 6 - Standard & Poor's placed its double A corporate credit, bank loan and senior unsecured debt ratings, and its double A-minus subordinated debt rating on Motorola Inc on CreditWatch with negative implications.
At the same time, Standard & Poor's affirmed its A-1 plus commercial paper and short-term corporate credit ratings on Motorola.
The action reflects concerns that the company's profitability will remained pressured in 1998, continuing a trend of weaker return on capital since 1996, due to conditions in the semiconductor, cellular, and paging sectors.
Schaumburg, Illinois-based Motorola has been impacted by heightened competition leading to steepening semiconductor price pressures and a cellular handset productions transition, as well as weakness in the domestic paging industry and depressed purchasing power in some regions.
The company now expects net earnings in the March 1998 quarter to be at least 25% below general expectations, or about $200-$225 million, compared to $325 million in the March 1997 quarter.
The duration of the underlying economic situation is uncertain. Although the company is expected to adjust its cost structure somewhat, its long term commitment to new product development, maintaining strong market shares and extending its geographic reach have required ongoing investments.
The company remains a world leader in the rapidly evolving communications and semiconductor industries, supported by a strong balance sheet and conservative financial practices.
Standard & Poor's will assess the long-term effects of regional economic conditions and competitive pricing pressures on Motorola's profitability.
16:22 03-06-98
Copyright 1998 Reuters Limited. All rights reserved.
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INTERVIEW-Siemens <SIEG.F> sticks to DRAM chips
By Marcel Michelson
SOPHIA-ANTIPOLIS, France, March 6 (Reuters) - German industrial group Siemens AG <SIEG.F> remains committed to the DRAM memory chip market and a senior executive said the current reaction to DRAM prices was "hysterical."
Soenke Mehrgardt, the number two executive of Siemens Semiconductor Group, said in an interview that the group was not worried about current low DRAM (Dynamic Random Access Memory) prices.
"Frankly, the reaction of the market is hysterical. I have been in this business for many years and you always see that prices go down and that capacity goes up," he said.
"At the moment prices are very low but that is temporary," he said.
"Anyway, it does not really matter. We as industrialists are not basing our decisions on day-to-day prices, we look at the trend. As long as we cut our costs quicker than the sales price comes down, we are all right," Mehrgardt said.
Mehrgardt was in France to open a new research centre at Sophia-Antipolis near Nice, replacing Semiconductor Group chairman Ulrich Schumacher who was ill.
"If you observe the market, the only thing you see is that the down cycle is stimulating technological development," he said, adding that there was a rush from 16 Megabit, to 64 Megabit and 256 Megabit.
"For us, we believe we did a very good job in restructuring our costs in order to be a cost leader," he said.
At the moment, DRAM represents some 15 percent of sales due to the low price of $2 per unit but in general it accounts for one-third of sales.
"There is a corridor of around one-third of sales (for DRAM) and we have no policy to reduce that," he said. He declined to estimate when DRAM prices would go back up.
Siemens is the number 12 semiconductor group in the world, with a market share of 2.4 percent, and number two in Europe behind SGS-Thomson Microelectronics NV <STM.PA>, which ranks 11th in the world.
Mehrgardt said it was Schumacher's intention to be among the top 10, partly by increasing the geographical spread of sales and partly by the "logic offensive" of launching into the "system-on-chip" higher added value semiconductors.
"We have to remain realistic. People who believe that system on silicon is the holy grail can be deceived, those prices too will come down eventually," he said.
Siemens has close partnerships with IBM <IBM.N> and more recently with Motorola Inc <MOT.N> for chip production. It announced in January it would develop 300 mm wafers with Motorola, instead of the current 200 mm, to boost yields and cut production costs further.
In April, the two companies will open a $1.5 billion DRAM facility in Virginia, in the United States, that will start with production of 64 Megabit chips and later move to 256 Megabit.
Siemens opened a plant in Taiwan in October in a joint venture with local group Moselvitelic.
This will help the semiconductor group get 30 percent of sales from the United States in 2001, 30 percent from the Asia-Pacific market and 40 percent from Europe. Sales now are 57 percent from Europe, 18 percent from the United States and 23 percent from Asia-Pacific.
Mehrgardt declined to comment on profitability. Semiconductor activities made a 105 million mark pre-tax profit for the year to September 30, 1997.
"Clearly we are enjoying the downcycle in DRAM like the others, but our cost structure is better."
Siemens France chairman Michel Robin said the group was becoming the biggest German employer in France, with over 10,000 people, and expected sales of more than six billion marks in the year to September 30, 1998, up from 4.8 billion in the previous year.
France still plays second fiddle to Britain, which is Siemens' biggest market in Europe after its German home base. Robin said France would soon take over.
11:21 03-06-98
Copyright 1998 Reuters Limited. All rights reserved. ---
INTERVIEW - Intel <INTC.O> seeing broad slowdown
By Martin Wolk
SEATTLE, March 6 (Reuters) - Intel Corp. President and chief operating officer Craig Barrett said Friday that Europe and the United States have been the major areas of weakness in orders from computer manufacturers so far this year.
Barrett also said in an interview that the order slowdown announced late Wednesday has been "more or less across the board" and not concentrated on any single price point.
"We're seeing a kind of general malaise in OEM orders," he said, referring to the original equipment manufacturers who are Intel's primary customers.
Intel rattled the stock market Thursday with its warning the previous day that its first-quarter revenue would fall about 10 percent short of previous expectations. But after dropping more than 10 points Thursday, Intel bounced back Friday amid a general market rebound and was up 2-5/16 at 77-7/8 in late Nasdaq trading.
Barrett said he could not explain the order slowdown, although he said the weak Asian economy was not a factor, noting that the Japanese and Korean markets had been weak for more than a year.
"These slowdowns are not new," he said.
The hardest-hit Asian economies, such as Indonesia and Thailand, are relatively small markets for Intel.
Barrett also discounted concerns about the impact of low-priced computers on Intel sales.
"Historically Q1 has been a little bit slower," he said. "The last year or two it hasn't. ... Maybe we're going back to that seasonal slowness."
Barrett spoke to Reuters after a presentation where he and Microsoft Corp <MSFT.O> Chairman Bill Gates promoted the use of the Windows NT operating system on Intel-based computers for high-end engineering applications such as product design and special effects.
Barrett said Intel itself still requires some non-Intel minicomputers to design its own computer chips, but beginning in 1999 the company will move to an architecture completely based on Windows NT systems.
But he said the transition to NT would not happen "overnight," and most major customers would retain a mixed environment for years to come with both Windows NT and variations of Unix.
Barrett said companies that wield enormous industry power like Microsoft and Intel need to behave differently than other companies with small market share, but he said there was "nothing illegal about a monopoly."
"I hope in this country that we don't move toward a tendency to investigate people just because they're successful," he said. "You can be successful and frustrate your competition by competing hard, competing fairly -- just by being better than the competition."
Like Microsoft, Intel has been the subject of a federal investigation into its business practices, and Barrett said the company has been cooperating by supplying truckloads of documents.
He also said the company trains its workers extensively in antitrust regulations.
Barrett also said computers would not become a true mass-market appliance until the industry makes them far easier to use and more reliable.
16:08 03-06-98
Copyright 1998 Reuters Limited. All rights reserved.
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RESEARCH ALERT - Motorola <MOT.N> sell repeated
CHICAGO, March 6 (Reuters) - Rodman & Renshaw Inc said Friday it reiterated its sell recommendation on Motorola Inc and reduced its 1998 earnings estimate to $1.40 a share from $2.45 a share.
"The negatives remain: declining demand for analog cell phones and a third place position in digital phones, a collapse in pager business because of competition from cheap cell phones, and finally, few if any real customers for the $5 billion Iridium satellite system," analyst Vincent Glinski said in a research note.
Glinski said he has maintained a sell recommendation on Motorola for the last six months.
Motorola said Thursday it expects first quarter earnings to be significantly below analyst expectations from the effects of weakened Asian currencies, mainly in the semiconductor area.
The stock closed down 2-1/16 at 53-5/8,
17:16 03-06-98
Copyright 1998 Reuters Limited. All rights reserved.
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