Semiconductor Stocks Up On Encouraging Comments
January 18 2012 - 3:05PM
Dow Jones News
Semiconductor stocks rallied Wednesday following encouraging
comments in the sector and ahead of earnings from giants such as
Intel Corp. (INTC) and Texas Instruments Inc. (TXN).
Positive commentary from analog chip maker Linear Technology
Corp. (LLTC), manufacturer Taiwan Semiconductor Manufacturing Co.
(TSM, 2330.TW) and semiconductor-equipment maker ASML Holding NV
(AMSL, ASML.AE) stood in contrast to recent guidance cuts from
other companies in the industry. Analysts said the news boosted
hopes that the chip sector may soon rebound following a few
quarters of tepid results.
"While we continue to expect estimate cuts for the group,
investor confidence in shortly reaching an end to the current
inventory correction has likely been boosted," Canaccord Genuity
analyst Bobby Burleson noted.
The news helped to push the Philadelphia SOX Semiconductor Index
to its highest level since July. The index recently rose 4.8% to
403.68. Among the index's biggest gainers Wednesday were Linear,
Altera Corp. (ALTR), Texas Instruments, Micron Technology Inc. (MU)
and STMicroelectronics N.V. (STM).
Semiconductor companies in general have posted softer results in
recent quarters because of weakening demand. Customers, worried
about an economic slowdown, have pared back orders as they work
through their inventory levels, but some observers have been hoping
the market had reached its low point.
The market will gain more clarity when some of the companies
start to report quarterly results. Intel is on tap for its
fourth-quarter results Thursday, followed by Texas Instruments on
Monday. Both Intel and Texas Instruments lowered their guidance for
the current period, with Intel citing the impact that severe
flooding in Thailand has had on the personal-computer industry and
Texas Instruments blaming broad-based lower demand.
On Tuesday, Linear, which makes analog chips that take
real-world signals, such as sound and light, and convert them to
digital signals, said it had reached an inflection point in its
business. It provided better-than-expected guidance for the current
period and said bookings improved in December and January.
Chief Financial Officer Paul Coghlan, speaking during a
conference call Wednesday, said customers remain concerned about
the global macroeconomic environment, but there are indications
business it turning around.
"Customers, although cautious, appear to want to stop reducing
inventory and invest modestly in demand," Coghlan said.
J.P. Morgan analyst Chris Danely noted that Linear was the first
semiconductor company to talk about higher bookings. He said he
expects that strength to spread across the sector in the first half
of the year, with inventory in the channel depleted almost to the
levels of the 2008 to 2009 downturn. Danely added that it is "time
to buy semis aggressively."
Linear shares, down 8.7% over the past 12 months, recently were
up 10% to $33. Its analog rivals were among the biggest gainers,
with Fairchild Semiconductor International Inc. (FCS) up 10% to
$14.34 and Analog Devices Inc. (ADI) ahead 5.6% to $39.13. Both
Texas Instruments and Intersil Corp. (ISIL) grew about 7%.
Meanwhile, Taiwan Semiconductor Manufacturing Co., which makes
chips for U.S. companies such as Qualcomm Inc. (QCOM), Nvidia Corp.
(NVDA) and Texas Instruments, sounded a slightly upbeat note about
its prospects for the first quarter. The company said it expects
revenue to be largely flat compared to the fourth quarter, instead
of lower as is the seasonal norm, as some customers are expected to
replenish their inventories after holding off from doing so for
months due to the dour global economic outlook.
But all wasn't rosy. The company said ongoing lower demand for
computer chips, which resulted in a decline in its fourth-quarter
net profit, has led it to cut planned capital expenditures by 18%
this year. Taiwan Semiconductor Manufacturing shares recently were
up 2.8% to $13.84.
Still, Dutch semiconductor equipment maker ASML Holding which
counts Intel and Samsung Electronics Co. (SSNHY, 005930.SE) among
its customers, said Wednesday that it expects a healthy start to
2012, as its customers invest in chip production to drive faster
and more powerful smartphones and tablet computers.
"It's too early to provide a full-year outlook, but the
prospects for the first six months, based on the expectations of
our clients, are good," Chief Financial Officer Peter Wennink
said.
ASML shares slid 1.2% to $42.07.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189;
shara.tibken@dowjones.com
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