Mid-4Q updates: Happy holidays for chipmakers!

December 5, 2003 – NationHalfway through the current fiscal quarter, several big chipmakers are spreading holiday cheer with revised financial outlooks — but one chipmaker will also receive a lump of coal in its stocking.

Thanks to better than expected chip sales across all geographic markets, Intel says 4Q03 revenue will come in at $8.5-$8.7 billion, toward the higher end of previous projections of $8.1-$8.7 billion, with gross margins up slightly to 62%. A year ago, Intel posted $7.16 billion in revenues and a profit of $1.05 billion. However, a $600 million impairment charge in its cell phone business will drag down overall 4Q results.

“It’s one of those quarters where you’d like to celebrate the business, and you’re looking at the fact that you have to write off,” said CFO Andy Bryant, quoted in an AP story. The charge is related to Intel’s acquisition of DSP Communications in 1999, which is being written down due to reduced growth expectations.

Investors weren’t overwhelmed with the added charges or outlook, which did not increase the top range of previous forecasts. Intel’s stock, which had seen gains earlier in the week, sank 3% after the news.

Also, at a recent analyst meeting in New York, Intel CEO Craig Barrett said customers outside the US are beginning to reinvest in IT. In reports from Dow Jones and Reuters, Barrett said that as much as half of Intel’s business will come from overseas and emerging markets, where Intel expects to achieve double-digit growth even if the overall market remains flat. “Hopefully, we’ll start to see some enterprise growth in 2004,” said Barrett.”We’ve seen some sprinkling signs of that, but I don’t expect a major, major upgrade cycle.”

AMD says that a build-up in demand that started in 3Q is carrying over into 4Q. “Christmas will happen; demand is definitely there,” said CFO Robert Rivet, according to Dow Jones. Rivet pointed to sales of consumer electronics such as mobile phones with camera features. Rivet also said that AMD’s microprocessor business would see a seasonally strong quarter.

Texas Instruments has upgraded its 4Q03 projections due to continued strong demand, particularly for wireless applications. TI now projects overall revenues of $2.64-$2.77 billion, higher than previous estimates of $2.49-$2.70 billion, and 22%-28% above 4Q02. For its chip business, TI expects $2.33-$2.44 billion, compared with earlier projections of $2.19-$2.37 billion. Earnings are expected to be $0.25-$0.27/share (including $0.07/share from the sale of Micron stock), nearly double its previous estimates, and compared with a $600 million loss last year including items. Ron Slaymaker, VP of investor relations, cited particularly strong demand for chips used in wireless devices, while acknowledging that “most major semiconductor lines are expected to show double-digit sequential growth,” according to Dow Jones. “We don’t see inventory building anywhere in the channels,” he added, suggesting that the growth is not due simply to customers stockpiling inventory.

For its fiscal 2Q04 which ended Nov. 23, National Semiconductor reports net income of $65.8 million — including a $5.3 million charge — compared with $6.2 million a year ago. Sales of $473.5 million are up 12% from a year ago, and worldwide bookings were up 36% due to higher demand for computers, displays, and wireless communications devices. It was National’s strongest bookings quarter in three years, according to Brian Halla, company chairman, president, and CEO. “Sales are up, expenses are down…we are ahead of the goals we set for ourselves.” For the third quarter, typically a soft one for National Semi, the company said it already has a higher backlog than anticipated, and expects a 3%-5% overall increase in revenue.

Fairchild Semiconductor has raised its 4Q03 revenue outlook to 8%-10%, up from earlier projections of 6%-8%, with order growth across all end markets. Bookings were especially strong in October and November, raising the backlog “significantly higher” than the end of 3Q, said Kirk Pond, chairman, president, and CEO, with particular strength in the computing, industrial, andcommunications infrastructure markets. Utilization rates are above 85% with some facilities above 90%, added Hans Wildenberg, executive VP and COO. However, Pond said that the company still needs a strong holiday sales period to extend the current growth phase into 1Q04.

Looking ahead to 2004, STMicroelectronics says sales will be up as much as 20% next year, and the company is expecting to grow even faster to boost its market share. “The upturn this time is robust,” said Chairman Pasquale Pistoro, in an interview with the Frankfurter Allgemeine Zeitung. STMicro is also interested in expansion via acquisition, particularly in the US or Asia, “if the opportunity…were to arise.”


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