Based on data from select vendors this week, the second-quarter outlook appears to be flat-to-weak for communications ICs, DRAMs, flash memories and other semiconductor products. The prospects for microprocessors look mixed despite Intel's bullish tones.
Intel said it expects to achieve double-digit percentage annual growth in 2005, as it benefits from investments in manufacturing capacity, its platform strategy and emerging markets, according to online reports. Intel executives spoke Thursday (May 5) in New York at a one-day conference organized by the company for financial analysts.
"After five years of essentially zero revenue growth, we believe it is becoming increasingly clear that Intel is going to be able to generate close to 10 percent revenue growth over the next five years, as its ASPs stabilize in large part due to the growth of the higher-priced notebook market," said Paul Leming, an analyst with Princeton Tech Research (Princeton Junction, N.J.),
"We believe that Intel is trying to make the claim that the PC market can grow faster than 6-7 percent year-over-year that many analysts are projecting in 2006," said Richard Shannon, an analyst with Piper Jaffray. "We are not disclaiming Intel's focus, but our hesitancy hinges on the purchasing power of citizens in (emerging countries) to afford a PC at current prices."
The PC market actually remains a mixed bag. Based on channel checks in Taiwan, PC motherboard shipments are projected to decline 8.3 percent sequentially in the second quarter of 2005, while notebook PC production should grow 10.3 percent in the period, according to a report from Jefferies & Company Inc. (New York).
The data is based on figures from the four largest PC desktop motherboard manufacturers and the top-11 notebook makers in Taiwan. The island is the world's largest maker of motherboards, notebooks, among other products.
"Based upon our proprietary channel checks in Taiwan, we believe PC demand remains seasonally normal for the June quarter," said John Lau, an analyst with Jefferies & Co. (New York).
"Our checks into Taiwan indicate a normal level of motherboard units in the channel of about four weeks," he said in a report. "We note that some spot shortages for notebooks in Q1 2005 are being addressed this current quarter Q2 2005."
It's a slightly different picture for the DRAM industry, especially at Micron Technology Inc. "Specifically, comments on additional inventory builds and further pricing deteriorations have negative implications for the June quarter (at Micron)," Lau said.
"Near-term pricing stabilization may likely have little effect on overall quarterly results for Micron," he said. "Looking into the longer term, diversification of the product lines, including allocation of more wafer starts to higher profitable products such as image sensors and flash may diversify and lower volatility."
By the end of fiscal 2006, the company aims to have half of its current wafer starts in core DRAMs and the remainder to split three ways among flash, image sensors, and specialty DRAMs, he said.
Overall, the analyst said he remains "negative" on Micron's fundamentals. The analyst is lowering his fiscal 2005 EPS estimates for Micron from $0.58 to $0.39 on revenue of $4.94 billion verses $5.16 billion and his fiscal 2006 estimates from $0.59 to $0.43 on revenue of $5.21 billion verses $5.71 billion.
On the communications side, Integrated Device Technology Inc. (IDT) this week said revenues for the fourth fiscal quarter were $97 million, an increase of just over 1 percent compared to the third quarter of fiscal 2005 and an increase of 3 percent from the fourth quarter of fiscal 2004.
IDT (San Jose) said GAAP net income for the fourth quarter of fiscal 2005 was $6 million, or $0.06 per diluted share, compared to net income of $3 million, or $0.03 per diluted share, for the third quarter of fiscal 2005. GAAP net income for the fourth quarter of fiscal 2004 was $8 million, or $0.07 per diluted share.
Going forward, IDT guided revenue to be flat to up 4 percent sequentially. "The enterprise and wireless segments are expected to continue to be strong, while management expects the PC segment to return to growth," said Ted Parmigiani, an analyst with investment banking firm Lehman Brothers (New York).
"Storage is expected to decline nominally by $1-$2 million," he said. "Distribution business is expected to soften."