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To: Joseph Pareti who wrote (61769)	8/4/1998 8:26:00 AM
From: Joseph Pareti	Read Replies (1) \| Respond to of 186894

this is Kurlak's third iteration in 3 weeks or so; may be we should invite him to the thread to give him a better opportunity to be heard :-) NEW YORK (CBS.MW) -- A wave of optimism about the chip industry subsided Monday as semiconductor shares fell and Merrill Lynch sounded a note of caution to investors. However, some analysts are saying now is the time to buy in to the depressed industry. Semiconductor stocks were mostly lower Monday after influential chip analyst Thomas Kurlak of Merrill Lynch said industry fundamentals for the group remain weak. Shares had rallied in the past few sessions, boosted by upbeat presentations at a chip conference and indications of improvement in PC industry conditions. Kurlak, however, hasn't found fundamental support for the recent optimism. "Input from semiconductor makers, distributors and end uses continues to be negative," Kurlak said. He maintains that even if PC inventories come down to manageable levels, that still won't address overcapacity in the chip industry. "Developments in the PC distribution channel are being overemphasized. A drawdown of PC inventory is not expected to fix the fundamental overcapacity problem the semiconductor industry continues to struggle with," Kurlak added. Not all analysts share Kurlak's dim view. Jonathan Joseph, chip analyst for NationsBanc Montgomery Securities, remains positive on the group although he admits that certain pockets of the industry, like the memory business, still face severe overcapacity conditions. Joseph said delayed and reduced plans for capacity expansion, coupled with a resurgence of demand have positioned the group for an upturn. "Demand has firmed up in the U.S. and Europe primarily, but also in China," Joseph said. Joseph recommends investing in the large-cap, high-quality names in the sector such as Intel (INTC) and Texas Instruments (TXN). He also remains bullish on companies that make chips for networking and communications applications such as PMC-Sierra (PMCS) and Applied Micro Circuits (AMCC).

To: Joseph Pareti who wrote (61769)	8/4/1998 2:42:00 PM
From: Paul Engel	Respond to of 186894

Re: "will this model spill over to the semiconductor world? Is this the next "inflection point ?" If I interpret your question properly, this has already happened many years ago with "Fabless" semiconductor houses. These houses design chips and use outside "foundry" fabs to process the wafers. Some companies are very successful - Level III, Altera, Xilinx, etc. Cyrix was also a fabless company before being acquired by NSM. They have been a failure both ways. Paul