More chipmakers forecast cloudy market skies

September 28, 2004 – More chipmakers are coming forward to downgrade their estimates for 3Q04 performance, claming inventory buildup has become an industrywide problem.

Cypress Semiconductor Corp., San Jose, CA, has lowered its 3Q revenue estimates for the second time in a month, after “little business improvement” in September. Projected revenues of $219-$221 million would be 16%-17% lower than 2Q sales, instead of 5%-10% lower indicated by a recent estimate. Earnings expectations also were cut to 3-5 cents/share.

Royal Philips Electronics said 3Q04 chip sales would be flat compared with the previous quarter, compared with previous projections of 3%-4% growth, although sales will be 27% higher than a year ago. The book-to-bill ratio will be below 1.0. Philips also indicated its capex would be about $750 million this year, and $615 million in 2005.

Applied Micro Circuits Corp., San Diego, CA, said that revenues for its September quarter would be $61-$62 million, about 9% lower than the June quarter’s $67.4 million. COO Tom Tullie cited two causes: lower-than-expected orders from key customers adjusting their own inventories, and softness in Asia, particularly reduced demand in China’s end markets.

Cirrus Logic Inc., Austin, TX, lowered its fiscal 2Q05 revenue estimates by 16%-25% from previous forecasts to $51-$52 million, which would be up slightly sequentially but down about 12% from a year ago. Lower demand for consumer ICs due to an industry-wide inventory correction was cited as a main cause, while the company said demand for analog ICs remained relatively strong during the quarter.

AMIS Holdings, parent company of AMI Semiconductor, Pocatello, ID, reiterated its guidance for 3Q04 earnings at $0.18/share, with gross and operating margins both up 50 basis points. Revenues are expected to be down 2%-4% sequentially, however, due to “improved product mix” and low bookings in the communications and computing markets.

Agere Systems, Allentown, PA, reiterated its revenue expectations for 4Q at $420-$445 million, and said 4Q04 revenues would drop by 5% due to inventory adjustments and seasonal declines. “The issues we faced with three major customers now seem to have broadened into an industry-wide inventory correction,” noted John Dickson, president and CEO. The company also said it will close its wafer fab in Orlando, FL, by the end of next year, and plans to lower its R&D and SG&A expenses by about 9% to $170-$175 million, in an effort to realign costs with revenue expectations and improve profitability. Agere has been unable to find a buyer for the Orlando fab since announced its intention to sell it in 2002. Restructuring charges will total $340-$360 million, with about 40% of that amount recorded in 4Q04.


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