Forecast Lifts Chip Makers’ Stocks
Shares of chip makers jumped Monday after a market research firm said corporate spending on new computers would boost semiconductor revenue 11.2% this year, up from a previous forecast of 8.3%.
Gartner Dataquest attributed the predicted uptick to “increasing signs that the corporate PC replacement cycle has indeed begun.” The report also said a pickup in the worldwide economy would fuel “a more broad-based semiconductor market recovery” over the next 18 to 24 months.
The news sent the SOX chip-stock index up 5.2% to its highest level in more than a year. The index, which comprises Intel Corp., Advanced Micro Devices Inc. and 16 other big chip makers, has climbed 43% this year.
Analysts say they have seen encouraging signs in the last few months that after two frugal years, customers are starting to buy new chip-driven machines.
“We’ve got the overall economy looking stronger, so both corporate guys and consumers are feeling more comfortable spending money now,” said Martin Reynolds, a research fellow at Gartner Inc., the Stamford, Conn.-based firm that published the report.
Not all analysts, however, were ready Monday to pronounce a recovery.
“Today was a great day for semiconductor stocks,” said Nathan Brookwood, an independent chip analyst. “On the other hand, Wall Street is not the best indicator of turnarounds in the actual markets. I think that’s a bit early to call this a turnaround.”
AMD led Monday’s rally after news that Fred Hickey, the bearish editor of the High Tech Strategist newsletter in Nashua, N.H., was buying the firm’s shares.
In a report in the financial magazine Barron’s, Hickey said AMD’s powerful new Opteron chip for server computers could steal market share from archrival Intel and spark a recovery in AMD shares. And Hickey told Reuters that IBM Corp.’s decision to include Opteron chips in some of its server computers would give the firm momentum.
That boosted Sunnyvale, Calif.-based AMD’s shares 14%. They rose $1.11 to $8.91 on the New York Stock Exchange.
Broadcom Corp., the biggest maker of cable modem chips, saw its stock jump $1.59, or 7.5%, to $22.85 on Monday in regular Nasdaq trading. It rose a further 5.5% to $24.10 in extended trading after the Irvine company raised its third-quarter sales forecast in a mid-quarter conference call.
Chief Financial Officer William Ruehle said Broadcom’s sales would reach $416 million in the current quarter. The company previously forecast revenue of $400 million to $410 million. Revenue in the year-earlier period was $290 million.
Ruehle addressed analysts Monday to quell concerns that Broadcom was overly dependent on ServerWorks, a manufacturer of server chips that Broadcom bought in 2001.
Broadcom fired ServerWorks’ top executives, including its founder, in March over differences in operational strategy. That prompted analysts to question the division’s viability.
“Some say ServerWorks generates most or all of our operating profit. That is categorically wrong,” Ruehle said. All of Broadcom’s business units are profitable, he said, without giving specifics.
Reuters and Bloomberg News were used in compiling this report.
