TAKING THE PULSE: Intel Corp. (INTC), the world's largest
computer-chip maker last week posted one of the most profitable
quarters in its history, fueling hopes that European semiconductor
companies can add to the rebound in tech stocks.
Intel, which makes the chips that run about 80% of the world's
computers, last week posted revenue that beat Wall Street estimates
and improved its gross margin through lower-cost manufacturing.
Despite its $1.25 billion legal settlement with Advanced Micro
Devices Inc. (AMD), Intel reported a fourth-quarter profit of $2.28
billion, or 40 cents a share, up from $234 million, or 4 cents a
share, a year earlier.
STMicroelectronics NV (STM), Europe's largest chip maker by
sales, and Germany's Infineon Technologies AG (IFX.XE) are expected
to post better-than-expected results in the October to December
quarter, though they are more exposed to the wireless and
automotive sector than personal computers, Cheuvreux analysts said
in a note after Intel's results.
JP Morgan analysts expect European semiconductor shares to
remain buoyant in the first half of the year and forecast the
semiconductor cycle will likely peak in the fourth qarter on
improving demand in many end markets.
Peter Wennink, Chief Financial Officer of Dutch ASML Holding NV
(ASML.AE), the world's largest maker of lithography systems, which
map electronic circuits onto silicon wafers, told Dow Jones
Newswires in December that he expects a "reasonably good" first
half of 2010.
Shortly before the end of last year, Infineon raised its
guidance for revenue and operating profit, citing a good
performance in its automotive and industrial and multimarket
businesses and the stock has rallied strongly, leading to questions
from some analysts about how much further it can go.
Meanwhile, U.K.-based chip designer ARM Holdings is set to
benefit from continuing strong demand for smartphones and the new
clutch of netbooks and Internet tablets.
COMPANIES To WATCH
--- ASML Holding N.V. (ASML.AE) --- (Jan 20)
MARKET EXPECTATIONS: Analysts expect ASML's fourth-quarter sales
to come in at EUR577 million, above the company's guidance of
EUR550 million, according to a poll of Dow Jones Newswires of six
analysts. New orders could bring positive surprises on strong
capital expenditure from makers of dynamic random access memory, or
DRAM, chips and foundries that produce chips on their behalf.
MAIN FOCUS: Analysts will be looking for signs that
manufacturers of NAND flash memory chips, which are used in
smartphones, plan to invest in capacity expansion in the second
half of the year, and so place orders with ASML in the first
half.
--- STMicroelectronics (STM) --- (Jan. 26)
MARKET EXPECTATIONS: STMicroelectronics is expected to
break-even at an operating level in the fourth-quarter and post
revenue at the top end of its guidance range of $2.38 billion to
$2.54 billion. Following the array of recent positive newsflow on
the sector, and confident messages from Chief Executive Carlo
Bozotti on the recovery, this should not come as a surprise.
MAIN FOCUS: Investors are keen to get an update on cost-cutting
measures as most highlight that the impact of restructuring on
STMicro's bottom line has yet to be seen. JPMorgan highlights that
STMicro's margin is likely to continue to lag that of peers in 2010
as there are still no visible changes in the group's cost structure
despite several restructuring plans, notably at ST-Ericsson, a
joint venture between STMicro and LM Ericsson Telephone Co. (ERIC).
Analysts will closely eye comments on first quarter outlook and
gross margin.
---Infineon Technologies AG (IFX.XE)--- (Jan. 29)
MARKET EXPECTATIONS: Infineon said in December it now expects a
high single-digit percentage rise in first quarter revenue and
operating profit, having previously expected both to be around the
same level, due to a good performance in its automotive and
industrial and multimarket businesses, and analysts expect the
German logic chip maker to achieve its raised guidance.
MAIN FOCUS: Infineon's wireless operations were the growth
driver in the recovery phase last year, but JP Morgan analysts
expect its wireless segment to "see substantial growth in 2010," on
strong sales momentum for Apple Inc.'s (AAPL) iPhone, the ramp-up
of shipments of EDGE-based devices to Nokia Corp. (NOK) and market
share gains at Korean handset makers. Still, Bank of
America-Merrill Lynch, which recently downgraded Infineon to
neutral from buy, has some concerns "around the long term
positioning of Infineon's wireless business."
--- ARM Holdings PLC (ARM.LN) --- (Feb. 2)
MARKET EXPECTATIONS: Analysts expect fourth quarter and 2009
dollar revenue to be down following a sharp drop in demand during
the economic slump. ARM, which generates the bulk of its sales in
U.S. dollars, reiterated in October that 2009 dollar revenue would
be at least in line with market expectations. Based on a company
survey of 29 analysts, ARM is expected to report 4Q revenue of
$133.2 million, down from $149.4 million a year ago, and full-year
revenue of $482 million versus $546.2 million last year. Revenue
across the semiconductor industry was expected to be down 20% in
2009.
MAIN FOCUS: Investors will be keen to hear about the group's
current trading and outlook, given forecasts of demand picking up.
In October, ARM said it is "well-positioned to take advantage of
the generally anticipated improvements in the semiconductor
industry" in 2010. The group expects revenue this year to be ahead
of the 15% growth projected for the industry.
"Medium term we expect continued strength in the smartphone
market as well as market share gains in Home and Enterprise to
drive ARM's margins. More longer term, portable PCs such as
netbooks and Internet tablets are likely to push operating margins
towards 50%," RBS analysts said in a recent research note.
---ASM International (ASMI)--- (Feb. 24)
MARKET EXPECTATIONS: JP Morgan analysts expect total revenue of
EUR194 million, up 8% compared with the September quarter, with
further subsequent improvements of 20% at ASMI's front end
unit--which makes equipment to produce semiconductors--in the first
quarter. The division is still, however, expected to be loss making
on an operational basis. ASMI's back-end unit, which assembles and
packages the chips, is set for a 4% increase in revenue in the
first quarter.
MAIN FOCUS: JP Morgan expects good progress on cost cutting at
ASMI's front end unit, which it expects to be profitable by the end
of 2010. Still, they remain uncertain about whether the current
rally in semiconductor stocks will continue in the second half to
help return it to break even.
-By Archibald Preuschat, Dow Jones Newswires; +49 211 13872 18;
archibald.preuschat@dowjones.com
(Ruth Bender in Paris and Lilly Vitorovich in London contributed
to this item.)
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