Semiconductor Bear Trap
National Semiconductor Corp., whose chips boost battery life in mobile phones and notebook computers, said third-quarter profit fell 17 percent as customers worked off excess inventory. Net income dropped to 21 cents a share from 24 cents, a year earlier. Sales declined 13 percent. Book to bill was negative, sales are sequentially flat, inventory levels are high and factory utilization weak.
``Investors are really looking for quality of revenues and National is really weaning off the lower-margin products,'' said Rick Whittington, an analyst with Caris & Co. in New York who rates the shares ``buy'' and said he doesn't own them. Yeah and I know why, "real quality" of declining revenue is what I see.
National Semi's net income included a $20 million pretax charge for previously announced job cuts. That charge was mostly offset by a $7 million pre-tax credit and a reduced income tax rate. The tax rate was 8.7%, thats quite a low tax rate, wonder what net income would have been with a regular tax rate. Which way do you think the stock went today? Shares rose 3.7% to $20.73 after the results were announced, edging closer to an eight-month high of $20.65 hit at the start of March.
Intel slowed production to stem the inventory build up, boosting average costs per chip. Sales had 13 percent growth, less than the 20 percent gain posted in 2004's first quarter. Demand slowed as inventory built up. Intel last month cut the price on its Celeron desktop chips by as much as 14 percent. The company also lowered the prices on Xeon server chips by as much as 34 percent after introducing newer models.
``Intel is trying to clean up inventory and prepare for the next coming product,'' said Tai Nguyen, an analyst at Susquehanna Financial Group in San Francisco. He raised his rating on Intel's stock to ``positive'' from ``neutral'' on March 1. ``When I was in Asia recently, I saw a lot of shortages.'' Ok, theres a glut in the market because of channel stuffing and he saw shortages. Uh-uh, yeah.
Intel has slowing sales growth, excess inventory, lowered utilization, increasing costs and price cuts to move inventory, what do you think the stock did? Intel shares rose 43 cents, or 1.7 percent, to $25.28 in extended trading after the report and have added 6.2 percent this year, the seventh-best performer in the 30-member Dow Jones Industrial Average.
The semiconductor stocks and the Nasdaq in general all have something in common, growth rates are negative, too many shares are outstanding, profit growth has slowed and they are over owned by big institutional investors. How quickly people forget and ignore the obvious. Avoid the bear trap run up which is in process and watch for a bottoming in late April, after the 1st Qtr 05 reports come out.
See: 10 reasons why Nasdaq will not recover soon. http://www.usatoday.com/money/markets/us/2005-03-10-nasdaq-usat_x.htm
``Investors are really looking for quality of revenues and National is really weaning off the lower-margin products,'' said Rick Whittington, an analyst with Caris & Co. in New York who rates the shares ``buy'' and said he doesn't own them. Yeah and I know why, "real quality" of declining revenue is what I see.
National Semi's net income included a $20 million pretax charge for previously announced job cuts. That charge was mostly offset by a $7 million pre-tax credit and a reduced income tax rate. The tax rate was 8.7%, thats quite a low tax rate, wonder what net income would have been with a regular tax rate. Which way do you think the stock went today? Shares rose 3.7% to $20.73 after the results were announced, edging closer to an eight-month high of $20.65 hit at the start of March.
Intel slowed production to stem the inventory build up, boosting average costs per chip. Sales had 13 percent growth, less than the 20 percent gain posted in 2004's first quarter. Demand slowed as inventory built up. Intel last month cut the price on its Celeron desktop chips by as much as 14 percent. The company also lowered the prices on Xeon server chips by as much as 34 percent after introducing newer models.
``Intel is trying to clean up inventory and prepare for the next coming product,'' said Tai Nguyen, an analyst at Susquehanna Financial Group in San Francisco. He raised his rating on Intel's stock to ``positive'' from ``neutral'' on March 1. ``When I was in Asia recently, I saw a lot of shortages.'' Ok, theres a glut in the market because of channel stuffing and he saw shortages. Uh-uh, yeah.
Intel has slowing sales growth, excess inventory, lowered utilization, increasing costs and price cuts to move inventory, what do you think the stock did? Intel shares rose 43 cents, or 1.7 percent, to $25.28 in extended trading after the report and have added 6.2 percent this year, the seventh-best performer in the 30-member Dow Jones Industrial Average.
The semiconductor stocks and the Nasdaq in general all have something in common, growth rates are negative, too many shares are outstanding, profit growth has slowed and they are over owned by big institutional investors. How quickly people forget and ignore the obvious. Avoid the bear trap run up which is in process and watch for a bottoming in late April, after the 1st Qtr 05 reports come out.
See: 10 reasons why Nasdaq will not recover soon. http://www.usatoday.com/money/markets/us/2005-03-10-nasdaq-usat_x.htm
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