Qualcomm Inc (QCOM)

[khemara_qc]

Chip Stocks Seen Rebounding In Second Half Of 2005
04.12.05, 10:48 AM ET

http://www.forbes.com/markets/2005/04/12/0412automarketscan06.html?partner=yahoo&referrer=

J.P. Morgan expects semiconductor companies to report mostly in-line first-quarter results with a few disappointments due to weakness from the wireless end market and distributors. "It appears as though [end-market] demand remains sluggish due to seasonality," the research firm said. "However, we are concerned with a possible inventory build in the wireless end market given the pushouts from several handset manufacturers." J.P. Morgan reiterated an "underweight" rating on Agere Systems (nyse: AGRa - news - people ), citing unevenness in its mobile-phone business and an overall sluggish telecommunications market. The firm said Agere will experience ongoing sluggishness from telecom customers such as Nortel Networks (nyse: NT - news - people ), Lucent Technologies (nyse: LU - news - people ) and Alcatel (nyse: ALA - news - people ). The firm said best results should come from companies such as Altera (nasdaq: ALTR - news - people ) and Xilinx (nasdaq: XLNX - news - people ) that are supplying the communications end market, and from companies in the analog segment such as International Rectifier (nyse: IRF - news - people ). J.P. Morgan remains most concerned about companies selling into the wireless space such as Freescale Semiconductor (nyse: FSL - news - people ), Texas Instruments (nyse: TXN - news - people ) and RF Micro Devices (nasdaq: RFMD - news - people ). "For the second quarter, we expect sequential revenue guidance in a range of slightly down to slightly up for most companies," the firm said. "We expect the best relative guidance from programmable logic device and high-quality analog companies due to a recovery in component orders from the communications end market and relatively stable component pricing." For the second half of 2005, J.P. Morgan said chip stocks are likely to rebound thanks to fundamentals bottoming out as well as a combination of low inventory and stable end demand. "We maintain our bullish stance on semiconductor stocks as it appears several leading indicators of the industry such as gross margins, utilization rates, earnings estimates, and year-over-year growth are in the process of bottoming and should improve in the second half," J.P. Morgan.