SOX down 5, these pump jobs aren't working:
UPDATE 1-RESEARCH ALERT-Morgan Stanley upgrades chip industry
(Reuters 02/19 12:18:07)
(Adds details)
SAN FRANCISCO, Feb 19 (Reuters) - Morgan Stanley said
semiconductor analyst Mark Edelstone raised his ratings on the
shares of Intel Corp. <INTC.O>, Texas Instruments Inc. <TXN.N>
and Xilinx Inc. <XLNX.O> on Wednesday, citing favorable
valuations on those stocks and in the chip industry overall.
Edelstone raised his view on the semiconductor industry to
"attractive" from "in-line," while raising his rating on Intel,
TI and Xilinx to "overweight" from "equal weight."
"While there are still numerous issues that we are
concerned about, we believe that reward to risk parameters have
become more attractive during the last few months," Edelstone
wrote in a note to clients on Wednesday.
"Consequently, we expect our universe of semiconductor
stocks to outperform the overall market during the next 12 to
18 months," he wrote.
Edelstone wrote that he believed new processor products
from the world's largest semiconductor manufacturer, Intel,
including the Centrino mobile chip and next-generation Itanium
2 chip, would drive earnings higher in the next two years.
Lower unit costs and pricing power derived from being the
largest chipmaker should also help boost earnings. The lower
production costs would come from moving chip production from
the 130 nanometer process to a 90 nanometer process on larger
silicon wafers that are 300 millimeters across.
Intel on Tuesday said that it planned to spend $2 billion
to upgrade one of its chipmaking plants in Chandler, Arizona,
with equipment that can process the larger wafers. More chips
can be carved from each larger wafer, cutting costs and
boosting efficiency.
Texas Instruments, based in Dallas, should benefit in the
first quarter from its confidence in revenues and per-share
results in the current period, and from inventories being, in
Edelstone's belief, at "an all-time low."
Last week, TI, the top maker of chips for cellular phones,
backed its earlier forecast for first-quarter earnings of 6
cents a share, expecting revenue to remain about even with that
of the fourth quarter.
Edelstone wrote that Xilinx should benefit from strong
products -- including its Virtex product line, with which it
has been able to replace application specific integrated
circuit, or ASIC, chips at customers.
Xilinx, based in San Jose, California, makes programmable
logic device, or PLD, chips, that can be reconfigured by
customers.
Both Xilinx and its chief rival Altera Corp. <ALTR.O> have
been working to lower the cost of PLD chips so that they can
compete with lower-priced ASIC chips in telecommunications
markets, with large corporate customers and in other
industries.
"We believe that a strong product cycle and a significant
margin expansion potential should enable Xilinx to enjoy strong
earnings growth during the next several years," Edelstone
wrote.
Shares of Intel were unchanged at $16.71; shares of TI were
off 6 cents, or less than 1 percent, to $16.18; and shares of
Xilinx were unchanged at $22.09.
((Reporting by Duncan Martell, editing by Gerald E. McCormick;
duncan.martell@reuters.com; Reuters Messaging:
duncan.martell.reuters.com@reuters.net; +1 415 677-2536))
REUTERS
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