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To: DJBEINO who wrote (3762)	8/7/1998 6:12:00 PM
From: DJBEINO	Respond to of 9582

Lehman Analyst Predicts Recovery For Ailing Chip Industry NEW YORK -(Dow Jones)- Saying that stocks in the semiconductor sector have taken enough of a beating, Lehman Brothers Inc. Friday boosted his investment ratings on four chip companies including industry bellwether Intel Corp. The brokerage firm, which predicts a "strong upturn" in fourth-quarter results as chip demand strengthens, raised its rating on the company's stock to "outperform" from "neutral." However, at the close, Intel's stock (INTC) was down 31.3 cents at $86.688 on volume of over 20 million shares. Lehman also upgraded Advanced Micro Devices (AMD) to "outperform," while boosting its investment stance on both C-Cube Microsystems Inc. (CUBE) and Alliance Semiconductor Corp. (ALSC) to "buy." All three posted gains in active trading. According to reports, Lehman now expects only an 11% decline in full-year sales for the sector, down from its original forecast of 14%. In particular, shipments of dynamic random access memory, or DRAM, chips are expected to grow 30% in June, compared with a 13% decline in April and May. Lehman said the industry is being helped by large volumes of low-priced personal computers and strength in the telecommunications and data networking sectors, particularly from the likes of Lucent Technologies Inc., Nokia Corp., and Cisco Systems Inc. Although Intel continues to dominate more than 90% of the market for corporate sales of PC microprocessors, its share of the retail market has fallen sharply since the sub-$1,000 PC gained popularity last year. Both AMD, Sunnyvale, Calif., and Cyrix, Richardson, Texas, have undercut Intel's prices at the low end. Sales at the two companies have soared and as of June account for 38% of U.S. retail PC sales, up from just 5% in the same period a year earlier, according to ZD Market estimates. Intel, Santa Clara, Calif., has counterattacked by accelerating the launch of its new low-end Celeron microprocessor. Though the chip has received mixed reviews, sales have been swift. Analysts say Intel could regain several percentage points in the retail market, but add the company isn't likely to quickly resume its former dominance there. "It will be a real horse race," says Mel Thompson, analyst at MicroDesign Resources Inc., a market-research firm in Sebastopol, Calif. Few analysts suggest Intel will lose its dominant hold on the overall market, given the company's enormous resources and ability to maintain a wide technical lead at the high end of the product line. However, they say it is likely Intel will continue facing pressure on its gross profit margins as it struggles to compete on the low end of the line. Separately, Intel trimmed its stake in Avid Technology Inc. to 4.1%. It now owns one million common shares of Avid, which recently agreed to develop video and audio editing products for desktop computers using Intel chips. Avid (AVID) develops and supplies software, hardware and other technologies for storing, capturing, editing and distributing digital media. Its products are used in applications ranging from feature films, desktop video and post-production to broadcast news.