Tuesday, April 19, 2005

Satisfy Me.....

Satisfy Me A little less conversation, a little more action please All this aggravation ain't satisfactioning me A little more bite and a little less bark A little less fight and a little more spark Close your mouth and open up your heart and baby satisfy me Satisfy me baby Elvis...... http://www.infras.com/news/satisfyme.mp3 Earnings season in full swing. I am posting this right before the Intel quarterly release. A little less conversation (about the 2nd half recovery) and a little more (upside) action would be welcome. Last week, April 8 to be precise, I posted a Chartwatch for subscribers that detailed the slowing business conditions in the chip and chip equipment markets. Those charts showed how IC unit volumes were rolling over. The study also highlighted the "W" or, "canoe" shaped action taking place in the chip equipment sector. We have not heard much to dispute the expectations set forth in that letter. The stocks continue to waffle back and forth as the analytical community, bifurcated as they are, wrestle with possibility of the industry bottoming. Some are saying we are heading to new lows. Equity valuations are given some note but generally it is a matter of if the recovery will occur. Investing ahead of the recovery and everyone else is fashionable. A great deal of the news released during earnings season is keeping us from being "satisfied." While many will focus on the IBM report we can list a host of items that show weakening business conditions. Here's a partial list, in no particular order (some of these are borrowed from an ongoing Technology Matrix Report tabulated by Doug Rudisch of Bain Capital): ASM Lithography - no visibility into the second half (This was mentioned in the letter I mailed 4/08. That report also talked about the view from the Japanese capital equipment companies); Novellus - meets expectations but the street does not like the margin story and during the analyst conference call Chairman Rick Hill says he is concerned about the economy. I posted a bit about this in the Stock Blog; Teradyne and the other ATE vendors are getting clocked because the street is expecting weak orders for the quarter. Teradyne reports after the close and will host a conference call tomorrow morning. IBM (everyone knows what that did to the market); Sun Microsystems - $120 million light of consensus (looks like trouble here); Dell and IDC (IDC the forecasting firm) indicate that PC sales growth has been slowing; Samsung - Revenues down a bit below consensus but profit margins were way off at 1.498tn vs expected levels of 2.103tn; Fairchild Semiconductor - guides below expectations after reiterating in their mid-quarter update, just 1 month ago, that business was picking up; Atmel - forecasts a loss on flat revenues. Today we have a story on Digitimes stating that the two largest foundries TSMC and UMC may have to lower their predictions for second-quarter growth due to a weaker-than-expected PC market and a decrease in orders from US wireless communications equipment makers. This is despite the fact that consumer electronics growth is expected to be up 5-10% this quarter. Here are a few other notables: Infosys - The number one Indian Service Provider cites weakness in financial services vertical integrations and guides lower; Foundry Networks - The network equipment and services company said it expects to report quarterly earnings per share of 6 cents to 7 cents, well below its previous forecast of 8 cents to 12 cents. They chopped their revenue outlook to about $84 million from projections of $100 million to $110 million. The company said that sales to north american enterprise customers were below forecast (last tally of the networkers showed they were 0 for 5 this quarter). There were a few good reports, Texas Instruments and Lam Research seem to be holding the line but the number of companies that are missing and some of the news about future demand beckons for a little less conversation, a little more action..... Please.... More shortly - including some comments about the Intel earnings report.

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