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Technology Stocks : FSII - The Worst is Over? -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (2296)	11/3/1998 1:27:00 PM
From: Joe Dancy	Respond to of 2754

It is official Don. The next boom is underway.:) Worldwide semiconductor sales are increasing at a much stronger rate than typically seen at this time of year, according to new market data released Monday by IC Insights. The Scottsdale, Ariz.-based research company said the high month-to-month growth rates from July to September show the uptick in chip sales is much more than a seasonal increase, and it provides more evidence that the next boom period has begun. techweb.com Let's hope - Joe

To: Donald Wennerstrom who wrote (2296)	11/5/1998 8:30:00 AM
From: Joe Dancy	Read Replies (1) \| Respond to of 2754

As you noted Don this sector is showing some signs of life and has had a torrid recovery - although this reporter claims the strong rally "hasn't gotten into gear". Maybe the "worst is over" as she notes: *** Copyright (c) 1998 Investors Business Daily Strong Rally In Chipmakers Hasn't Gotten Into Gear By Nancy Gondo 11/04/98 Chips are in demand again. Chipmakers are on the rise as a result. So why are chip-equipment stocks still in the doldrums? ''Their business usually lags by about six months,'' said David Wu, an analyst with ABN Amro Inc. in San Francisco. ''Chip equipment usually goes up and down after the chip companies do.'' The chip-making group is now rated No. 15 among IBD's 197 industry groups. It was at No. 127 three months ago. But makers of chip gear are still near the bottom of the list at No. 177. They've moved up 15 notches from the prior 13 weeks. Chip- related companies dominated Wall Street in '96 through most of '97. They got hit, though, on all sides as worries about Asia, falling chip prices and overcapacity at PC makers surfaced late last year. The tide changed in this year's second quarter, when PC makers finally sold their stockpiles of PCs and started building new ones. This sparked demand for chips, explaining October's turnaround in chip-making stocks. But even with this new demand, most chipmakers still have plenty of capacity and chip- making gear, analysts say. They're just now using the equipment they stocked up on in late '97. And that's left chip-gear makers holding the bag, for now. Making matters worse, unstable demand in Asia has forced some companies to lay off workers. In August, Applied Materials, the world's largest maker of chip gear, announced it would lay off about 2,000 employees, or 25% of its work force. ADE Corp., a Westwood, Mass.-based chip-equipment maker, said in mid-September that it would cut 15% of its work force due to continuing weakness in the chip industry. The company had already cut 12% in April. But the worst has probably passed. ''Prices of DRAM chips have stabilized and are now actually going up,'' said George Tharakan, an analyst with Santa Monica, Calif.-based Roxbury Capital Management. ''Lead times for DRAM chips are up, inventories in the (PC-maker) channel are down.'' In other words, chipmakers aren't waiting as long to produce chips that are ordered or they expect will be ordered. So two obstacles - pricing and oversupply of chips - have been removed. Analysts say PC makers are burning through their inventory. ''Now it's mostly driven by excess capacity,'' said analyst Jonathan Joseph of NationsBanc Montgomery Securities. ''It's been in absorption mode for maybe three or four months now. There's firmer pricing in the commodity area in particular . . . and better demand.'' So one obstacle still remains. The shaky global economy remains a question for chip-related companies. ''Europe and Asia together make up 47% of semiconductor revenues and hence a slowing in these regions will be a concern,'' Tharakan said. Worldwide third-quarter PC sales increased 15% from last year as weakness in Asia was overshadowed by growth in the U.S. and Europe, according to International Data Corp. The market researcher estimates the chip market will fall 9.2% to $124.6 billion this year. But in '99, it expects 8% growth. By 2000, IDC sees double- digit growth rates, helped by companies buying new equipment for Year 2000 fixes. ''With recovery or improvement in Asia and Japan not expected to start until the second half of '99, we cannot expect to see double- digit growth for the semiconductor market next year,'' said Mario Morales, IDC's research director for semiconductors. But many chipmakers' stocks have already been showing signs of improvement. . . . Investors know tech stocks often bring in lofty gains. Now that the market's looking better, they've been busy picking up battered stocks. ''It's a group of stocks that appeal to the greed element,'' Wu said. ''If you're greedy, you buy Yahoo or chip stocks.''