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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Math Junkie who wrote (19910)	6/4/1998 3:42:00 PM
From: Andrew Brockway	Respond to of 70976

Mounting Asian woes prompts semiconductor stock sell-off By Ismini Scouras Electronic Buyers' News NEW YORK -- Semiconductor investors are experiencing big-time jitters. As the financial community braces for another round of negative preannouncements by many major semiconductor companies, including Intel Corp., investors have kicked into sell mode, according to analysts. But what really precipitated the recent sell-off was rumblings from Asia that the economy isn't getting any healthier. "There was some incremental information from Asia-Pacific that the economy, particularly Japan, has continued to deteriorate as opposed to stabilize; and two, we've seen announcements of reasonably high inventories in the U.S.," said Vadim Zlotnikov, an analyst at Sanford C. Bernstein & Co. Inc., New York. "Both of them don't bode well for semiconductors in the near term, and that's basically juxtapositioned against what's been anticipation of extremely weak second-quarter results for the semiconductor industry." The Hambrecht & Quist Semiconductor Index last week was down 38.7% since the beginning of October and down 22.7% since the middle of April. As the electronics industry continues to work down excess inventory of finished goods, semiconductor suppliers' bookings have weakened considerably, analysts said. "PC inventory in the channel could decline by two to three weeks; that fact alone would reduce the demand as seen by the semiconductor vendors by 4% to 6%," Zlotnikov said, adding that PC-related IC suppliers' sales will hit bottom in the second quarter, but networking IC makers will continue to see sluggish orders in the third and perhaps the fourth quarters. The series of industry trends is making investors "cautious," said Rob Chaplinsky, an analyst at Hambrecht & Quist LLC, San Francisco. "I think investors are very careful here. It will be a buying opportunity when we get through these earnings periods and the stocks get adjusted, but I don't think we've necessarily hit bottom yet on these stocks," he said. Analysts estimate that the market is still another 15% to 20% away from hitting trough multiples. "It depends on the stock, though," Zlotnikov said. Severe pricing pressure across all sectors of the semiconductor industry will prevent worldwide sales from growing this year, according to Semico Research Corp. in Phoenix. Worldwide semiconductor sales will decrease 1% this year, compared with 4% growth last year, said Jim Feldhan, an analyst at Semico Research. Earlier this year, Semico estimated sales growth of 5% to 6%. "Our biggest factor [for revising the forecast] is that pricing is still very depressed," Feldhan said. The average selling price for memory devices fell another 17% in the first quarter, to $2.67, vs. $3.20 in the fourth quarter of 1997, according to Feldhan. While price erosion in the memory market has cut into worldwide sales growth for two years, growth this year will also be hampered by price declines in other segments of the chip industry, he added. Microcontroller ASPs, for example, dropped 4% in the first quarter, to $2.91, from $3.03 in the fourth quarter of 1997, while first-quarter microprocessor ASPs fell 6%, to $80.79, from $86.17 in the previous quarter.