Tippet; read BAD MEMORY paragraph;
another conservative
estimated loss of .43. it will be worse look at the last q ASP of 2.50 and already in June
nothing above 2...
>>>>U.S. Chipmakers' 2nd-Qtr Earnings Seen Lower: Industry Outlook
June 22 (Bloomberg) -- U.S. semiconductor companies will
report lower second-quarter earnings, hurt by price cuts in the
personal computer industry, the economic crisis in Asia and a
glut of PCs at distributors.
Intel Corp. is expected to earn 68 cents a diluted share in
the second quarter, according to IBES International Inc. That's
down from 92 cents in the year-earlier period, the third quarter
in a row that the world's largest chipmaker will report per-share
earnings that are lower than a year ago.
Asia's economic problems are hitting Intel, Motorola Inc.,
and Texas Instruments Inc. as plunging currencies in that region
force U.S.-based chipmakers to cut prices to remain competitive
while demand ebbs. Chipmakers also are having trouble getting
premium prices as Dell Computer Corp., Compaq Computer Corp. and
other PC makers demand low-priced components.
''It's going to be ugly,'' said analyst David Wu at ABN Amro
Chicago Corp. in San Francisco. ''When you have overcapacity and
the softening in demand that we've seen in Asia, that certainly
doesn't help.''
Motorola, the world's third-largest chipmaker, and specialty
chipmaker Lattice Semiconductor Corp. warned that earnings in the
second three months of the year will lag forecasts.
Motorola's struggles in Asian chip markets forced it to
restructure. It will cut 15,000 jobs, and probably shut down some
of its chip plants, analysts said.
Lattice said its fiscal first-quarter earnings will fall
more than expected because of weak demand for its products.
Missed Market
While demand is strong for sub-$1,000 PCs, Intel had been
avoiding that market because of its narrow profit margins.
Competitors have charged in and Intel has been forced to respond.
Intel unveiled its Celeron processor in the second quarter
to compete with offerings from Advanced Micro Devices Inc. and
Cyrix, a division of National Semiconductor Corp. In time for the
Christmas holiday season in the U.S., Intel will have a beefed-up
version of the Celeron code-named Mendocino.
''Anybody who touches the PC is in more difficult straits
than those who don't,'' said semiconductor analyst Mark Edelstone
at Morgan Stanley Dean Witter, who rates Intel ''strong buy.''
Another reason for the earnings shortfall is a glut of
computers on dealers' shelves. Compaq and International Business
Machines Corp., the two largest PC makers, misjudged demand in
the first quarter. The oversupply hurt computer companies and
chipmakers, and may continue into the second half of this year.
Intel said when it reported first-quarter earnings April 14
that it expected second-quarter revenue will be little changed to
slightly down from the $6.0 billion it had in the first quarter.
Advanced Micro is expected to fare worse than Intel, with a
loss of 18 cents a diluted share, compared with profit of 7
cents. While it has won major contracts from Compaq and IBM, it
only recently fixed its chip production problems. It may be hurt
by Intel's forthcoming Mendocino chip that will go head-to-head
with chips from AMD and Cyrix, which are found in cheaper PCs.
''I've forgotten how to spell profit when talking about
AMD,'' said analyst Wu. ''It's another lost quarter for them,
even though they've fixed their production problems.''
National Semiconductor is expected to report a loss of 39
cents a share in its first quarter ending in August, according to
the IBES average estimate. That compares with profit of 43 cents.
National is losing money because of production problems at
its Cyrix unit.
Bad Memory
Makers of memory chips face another brutal quarter of
falling prices and abundant supplies. Dynamic random-access
memory chips -- the most commonly used chips in PCs -- are
selling for less than $2 on the spot market in Thailand, down
from more than $8 a year ago, Wu said.
The decline will leave Micron Technology Inc. with another
loss in its fiscal fourth quarter. Micron is expected to have a
loss of 43 cents a diluted share in the quarter ending in August.
Rivals in South Korea and elsewhere built a slew of
factories after prices for DRAMs soared in 1994. Now there are
too many plants churning out the devices.
''DRAMs have gone from terrible to abysmal,'' Wu said.
That's bad news for Texas Instruments, another U.S. DRAM
maker. The company has been playing down its DRAM business, which
accounts for about 17 percent of sales. Low prices could force
Texas Instruments to report disappointing earnings, analysts
said.
TI has said for the last two quarters it was looking to exit
the business. Last week, TI said Micron will buy its DRAM
business for $830 million, giving Micron a deep-pocketed customer
list and getting TI out of a market that's dragged down earnings.
Revenue in the DRAM market isn't expected to rebound until
almost the end of 1999, according to market researcher Dataquest.
TI is forecast to earn 39 cents a diluted share, down from
54 cents in the year-earlier period.
Sales of its specialty digital signal processors, or DSPs,
will be strong, analysts said. DSPs are chips that when combined
with analog chips convert temperature, sound and light into the
digital language of computers. They're used in cellular phones,
air bags and microwave ovens.
2nd-Qtr Year-Ago Number of
Estimate EPS analysts
Intel $0.68 $0.92 34
Motorola 0.03 0.62 25
Texas Instruments 0.39 0.54 21
AMD (0.18) 0.07 24
Xilinx 0.36 0.41 22
Altera 0.38 0.39 21
National Semi * (0.39) 0.36 18
Micron Technology ^ (0.43) 0.33 16
Fiscal first quarter ending in June * Fiscal first quarter
ending in August ^ Fiscal fourth quarter ending in August
Estimates provided by IBES International Inc.
15:06:22 06/22/1998
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