By Kristin Jones
TAKING THE PULSE: Semiconductor demand has been recovering
slowly this year after a rocky 2011, when natural disasters in
Thailand and Japan disrupted the hard drive industry, compounding
the woes of a shaky economy.
But worries have emerged that a global economic slowdown could
hobble spending. On Monday, Advanced Micro Devices Inc. (AMD)
sharply lowered its revenue expectations on weakness in China and
Europe. Some analysts read the news as the latest indication that
PC sales are slowing across the board. A change in consumer taste
has contributed to that trend. In the U.S. and other markets,
people are relying more heavily on smartphones and tablets for
tasks once reserved for laptops and desktops; as a result, they're
waiting longer to replace their PCs. Companies that supply chips
for Apple Inc. (AAPL) iPads and iPhones or Samsung Electronics
Co.'s (005930.SE, SSNHY) popular smartphones have been the primary
beneficiaries of the shift.
A rise in cloud computing has offered new opportunities to
stalwarts like Intel Corp. (INTC), which has seen its data-storage
business grow. Meanwhile, a battle for patents in the tech field
has driven several major chip companies to make recent deals to
grow or shelter their intellectual property holdings.
COMPANIES TO WATCH:
Intel Corp. (INTC) - reports July 17
Wall Street Expectations: Analysts polled by Thomson Reuters
expect a second-quarter profit of 52 cents a share on revenue of
$13.57 billion. A year earlier, Intel reported a profit of 54 cents
a share, or 59 cents excluding acquisition costs and other items,
on revenue of $13.03 billion.
Key Issues: Intel, whose microprocessors supply the calculating
power for most of the world's PCs, has been grappling with a rise
in smartphones and tablets that don't use its technologies. Over
the past year, Intel's top and bottom lines have largely
demonstrated resilience, however, buoyed by sales of PCs in
emerging markets like China and Brazil, and by strength in the
company's data-center business amid a rise in cloud computing. At
the same time, Intel has been trying to revitalize demand for
laptops in mature markets with the promotion of very thin,
lightweight laptops called Ultrabooks. The company is also making a
push into the mobile market, in part with a drive to incorporate
its Atom chips into smartphones. Joining the scrum for patents,
Intel agreed to pay $375 million in cash for a portion of wireless
technology company InterDigital Inc.'s (IDCC) patent portfolio.
Qualcomm Inc. (QCOM) - reports July 18
Wall Street Expectations: The Street sees fiscal third-quarter
earnings of 86 cents a share on revenue of $4.68 billion. Qualcomm
reported year-earlier income of 61 cents a share, or 73 cents
excluding acquisition-related costs, stock compensation and other
items, on revenue of $3.62 billion.
Key Issues: Qualcomm, which helped popularize a technology used
in many cellphones called code-division multiple access, or CDMA,
has been one of the biggest beneficiaries of rising demand for
smartphones and other mobile devices. But Qualcomm has warned that
fiscal third-quarter growth likely was affected by constraints on
the supply of chips based on a new manufacturing process; the
company relies heavily on the limited services of Taiwan
Semiconductor Manufacturing Co. (TSM, 2330.TW), and is boosting
spending to help other manufacturing companies produce the same
chips. Supply issues, which are driving some of the company's
customers to seek out alternatives, are expected to limit revenue
upside through the end of September. Qualcomm makes much of its
profit by licensing patents based on its 3G technology and has been
benefiting from consumers' move to more advanced devices, as well
as increased adoption in emerging markets. In June, the company
unveiled plans to form a unit to separate its chip business from
its licensing operations, in an effort to shelter its
intellectual-property portfolio.
Advanced Micro Devices Inc. (AMD) - reports July 19
Wall Street Expectations: Analysts predict earnings of 10 cents
a share on revenue of $1.49 billion. The company reported
year-earlier earnings of 8 cents a share, or 9 cents excluding
special items, on revenue of $1.57 billion.
Key Issues: AMD recently warned that second-quarter revenue will
be dramatically lower than the company previously predicted, as
smaller-than-expected sales in China and Europe hurt its
equipment-manufacturer business. AMD competes against Intel to
supply chips for PCs, and against Nvidia Corp. (NVDA) in graphic
processors. Along with the impacts of slowing growth in the PC
market and weak consumer demand, some analysts suspected the
revenue drop reflects a loss in market share. The recent softness
comes after two quarters in which revenue wavered and earnings were
pressured by heavy charges. After encountering manufacturing
problems last year, AMD restructured its relationship with
Globalfoundries Inc., a company formed by the spinoff of its
manufacturing operations. The restructuring, while tied to
expenses, is expected to give AMD more freedom to make some of its
products elsewhere. The company is also looking to strengthen its
cloud computing capabilities, and completed its $334 million
purchase of server technology company SeaMicro earlier this
year.
Texas Instruments Inc. (TXN) - reports July 23
Wall Street Expectations: Consensus estimates call for earnings
of 41 cents a share, with revenue of $3.35 billion. A year earlier,
Texas Instruments reported per-share earnings of 56 cents a share
on revenue of $3.46 billion.
Key Issues: Texas Instruments makes chips used in everything
from cellphones to industrial equipment. The company has reported
four straight quarters of declining profits amid persistently soft
demand. The company, a longtime supplier of chips to Nokia Corp.
(NOK, NOK1V.HE), said in June that it expects its sales in the
wireless segment to continue to decline. Still, other areas showed
signs of a rebound. Last year's purchase of National Semiconductor
was geared toward helping results in the market for analog chips,
which convert real-world signals to digital. Texas Instruments
predicted last month that the analog and embedded chip businesses
would post solid sequential revenue growth in the second quarter,
and said that sales of communications infrastructure were
strong.
Broadcom Corp. (BRCM) - reports July 24
Wall Street Expectations: The Street projects income of 67 cents
a share on revenue of $1.95 billion. A year earlier, Broadcom
reported earnings of 31 cents a share, or 72 cents excluding
acquisition costs and other special items, on revenue of $1.8
billion.
Key Issues: Broadcom provides chips for set-top boxes,
networking and smartphones. Its major customers include highfliers
Apple and Samsung and stragglers like Nokia. Lately, growing sales
of its more-advanced 3G wireless chips have been partially offset
by declining revenue from its older 2G chips--a trend expected to
be reflected in its results. Broadcom has lately sought to expand
into networking, as seen in its February acquisition of NetLogic
Microsystems Inc., and in May predicted that its networking and
broadband segment sales would rise sequentially in the second
quarter. Earlier this month, Broadcom also reached a partial
resolution to a long-simmering fight with Emulex Corp. (ELX) over
networking technology licenses. Under the agreement, Emulex will
pay Broadcom $58 million in cash for certain patent licenses.
(The Thomson Reuters estimates and year-earlier earnings may not
be comparable due to one-time items and other adjustments.)
Write to Kristin Jones at kristin.jones@dowjones.com