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Date Posted: 17:18:27 01/09/00 Sun
Author: warren
Subject: Earnings outlook for semis...

Sunday January 9, 12:45 pm Eastern Time

Semiconductor industry earnings seen as strong

By Therese Poletti

SAN FRANCISCO, Jan 9 (Reuters) - Thriving U.S. computer chip makers are expected
to report a robust fourth quarter beginning this week, driven by a boom in communications
and consumer electronics products, strong personal computer demand and favorable
pricing.

After a three-year industry downturn, the semiconductor industry recovery was in full swing
this year, and chip factory utilization rates are running high. Both corporate and consumer
demand remained high in the fourth quarter, and chip makers have had more pricing power
this quarter, which will help boost revenues and profit margins, analysts said.

``I think fourth quarter earnings results will be fabulous for the semiconductor industry,'' said Mark Edelstone, a Morgan
Stanley Dean Witter analyst. ``We are looking for most companies to meet or beat expectations.''

However, one concern during the quarter was inventory imbalances, with some companies double-ordering to store up on
some parts, and shortages of others. The inventory issue became apparent last month after contract board manufacturer
Solectron Corp. (NYSE:SLR - news) announced first-quarter revenues that were short of expectations, due to some
component shortages. It also had a $400 million inventory increase, which it built up as a Y2K buffer.

One company that may see an impact from supply imbalances is No. 1 chip maker Intel Corp. (NasdaqNM:INTC - news),
which will be among the first to report. Intel will report fourth-quarter earnings after the U.S. stock markets close on Thursday.

Investors have been jittery about Intel's earnings, especially after PC maker Gateway Inc. (NYSE:GTW - news)
pre-announced lower-than-expected fourth-quarter earnings last week, citing in part an inability to get enough supplies of some
Intel chips.

Earlier in the quarter, Santa Clara, Calif.-based Intel said that amid strong PC demand, it hoped to meet all customer
commitments. Then in mid-November, the chip maker said it would have a hard time meeting orders beyond its existing
commitments.

``They (Intel) left a lot of money on the table too,'' said Ashok Kumar, an analyst with U.S. Bancorp Piper Jaffray. Kumar said
that due to supply constraints and some double bookings, which resulted in cancellations, marginal upside may be limited.

However, even with these limitations, most analysts are still expecting Intel to beat estimates. According to First Call/Thomson
Financial, the Intel consensus estimate is 63 cents a share, excluding any charges for its numerous acquisitions in recent months.

Intel archrival Advanced Micro Devices Inc. is also expected to fare well in the fourth quarter, with no problems in its
manufacturing. The company could report a break-even fourth quarter or a slight profit, buoyed also by its new Athlon
processors that have been exceeding expectations.

``Fourth quarter business conditions at AMD are outstanding,'' Erika Klauer, an analyst with Deutsche Banc Alex. Brown, said
in a recent report to clients. ``The company remains confident that they will achieve break-even results in the quarter.''

The communications sector is expected to be booming again, with possibly better-than-expected results from Texas
Instruments Inc. (NYSE:TXN - news), the leader is digital signal processors (DSPs), which are used in cell phones and other
communications devices.

In the consumer electronics arena, LSI Logic Corp. (NYSE:LSI - news) is expected to benefit from strong sales of satellite
set-top boxes and DVD (digital video disk) players during the holiday shopping season, analysts said.

The following are consensus estimates for fourth quarter earnings, unless otherwise noted, of some major U.S. semiconductor
companies, as compiled by First Call. COMPANY CONSENSUS REPORTING DATE AMD loss $0.01 Jan. 19 Altera
(NasdaqNM:ALTR - news) profit $0.30 Jan. 19 Broadcom (NasdaqNM:BRCM - news) profit $0.27 Jan. 18 Conexant
(NasdaqNM:CNXT - news), Q1 profit $0.20 Jan. 19 Cypress Semi (NYSE:CY - news) profit $0.29 Jan. 25 Intel Corp.
profit $0.63 Jan. 13 LSI Logic profit $0.43 Jan. 25 Texas Instruments profit $0.47 Jan. 25 Xilinx (NasdaqNM:XLNX - news)
Q3 profit $0.19 Jan. 18 Vitesse (NasdaqNM:VTSS - news) Q1 profit $0.14 Jan. 10

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