Job Cuts and Sector Upgrade Boost Stocks of Major Chip Companies
Major computer chip stocks rallied Thursday as National Semiconductor Corp. announced job cuts and as brokerage Merrill Lynch & Co. followed Morgan Stanley in upgrading its view of the sector.
The rally added to gains many of the stocks have racked up this year even as the broader market has declined.
National Semi, whose chips are used in cell phones and computer displays, said it would cut its workforce of 10,000 by 5%, sell two money-losing product lines and outsource next-generation chip manufacturing in a bid to cut costs and boost profit.
The two units to be sold make cellular baseband processors, a type of chip used in cell phones, and Geode chips, which serve as the brains of set-top boxes for TV-based Web surfing.
National Semi said it would concentrate on its core business of selling analog chips that convert real-world voices and visuals -- analog signals -- into digital signals used in cell phones, cameras and other devices.
The company expects the cost-cutting steps to save it about $15 million per quarter starting in its fiscal fourth quarter, which ends in late May.
The company’s shares jumped 97 cents, or 7%, to $15.35 on the New York Stock Exchange. They are up 2% this year and 46% since Oct. 8.
Chip stocks have held up this year on optimism that demand could grow substantially over the next 12 months despite the weak economy. Morgan Stanley on Wednesday raised its rating on the industry to “attractive.” On Thursday, Merrill Lynch upgraded the sector to “slightly positive” from “negative,” saying low chip inventories could mean good earnings surprises.
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Some chips don’t dip
Shares of a number of major semiconductor makers remain in positive territory this year despite the decline in the broader market. A sampling of chip stocks:
*--* Ticker Thurs Pcnt change in price: Company symbol close 2001 2002 YTD Microsemi MSCC $8 +113% -79 +37% International Rectifier IRF 21.90 +16 -47 +19 Xilinx XLNX 22.56 -15 -47 +10 Intel INTC 17.02 +5 -50 +9 Cypress Semiconductor CY 6.26 +1 -71 +9 Texas Instruments TXN 15.99 -41 -46 +7 PMC-Sierra PMCS 5.73 -73 -74 +3 National Semiconductor NSM 15.35 +53 -51 +2 Micron Technology MU 7.75 -13 -69 -20 LSI Logic LSI 4.32 -8 -63 -25 SOX chip-stock index 292.44 -9 -45 +1 S&P; 500 index 837.10 -13 -23 -5
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Sources: Bloomberg News, Times research
