Monday, August 28, 2006

Calls of Note Part 4

Couple of firms have interesting comments on Semis (especially the PC side of things) this AM:

- Friedman, Billings, Ramsey notes that datapoints from their Taiwan Semiconductor Bus Tour are best characterized as mixed, but PC data among the most bullish. Broadly speaking, they still think estimates are at some risk for the group as a whole, and prefer to see estimates come down before buying for 2007. Firm thinks the late July rally was based on hopes of improvement, which based on checks last week, and recent commentary by ADI, NSM, and MRVL, doesn't appear to be materializing. That said, they do expect to be buyers of the group later in the year, once more bad news is out of the way.

PC segment data indicates more optimism following a tough 1H. Bad news in the PC sector may be nearing an end. Firm believes 3Q motherboards are now up 15% - 19% QOQ versus earlier 20% -25% expectations, due to a slow start to the quarter. Business is however expected to improve in September, with initial motherboard forecasts appearing to reflect better than seasonal conditions for 4Q. Notebook units are expected to be up 20% QOQ in 3Q, with inventory burn now complete. Net, these initial datapoints appear to point to stabilizing conditions within the PC sector. As a result, the firm has upgraded ratings on INTC and NVDA, and raised estimates on AMD.

Notablecalls: Not actionable but good to know category.

- Banc of America notes that their latest checks within the PC supply chain suggest that business trends for Intel (NASDAQ:INTC) are tracking to expectations (+8% Q/Q rev growth at the mid-pt). And while still early, given the back-end loaded nature of the Sept. qtr, checks imply that the seasonal build is tracking to expectations, and that Intel's new products are ramping up to plan, with demand in many instances coming in stronger than expected.

Despite recent concerns regarding availability of Intel's latest chipset (Broadwater), checks indicate no evidence of any production issues/shortages. Although demand for Broadwater has been tracking stronger than expected, checks indicate that Intel has been able to ship 2+ million units of Broadwater since introduction in mid-June, which we believe is consistent to slightly ahead of the targeted ramp up of its new Core 2 Duo processors (incl. Conroe). As evidence of the strong demand for Conroe, the firm believes some customers have been willing to look to 'marry' Intel's older chipset (Lakeport) with Conroe in order to meet upside demand.

Checks in retail suggest that Intel will likely start a more prominent ad campaign sometime in Sept, and is likely to spend ~$100m for Core 2 Duo branding and over $100m in co-op marketing to support OEM-driven branding. This should alleviate concerns regarding lack of awareness for Intel's new brand.

Notablecalls: Think that the BofA note may cause some buy interest in the whole PC-related sector. Depending on how high the FBR upgrade on INTC will gap the shares today, I'd possibly be a buyer. Probably not a daytrade.

No comments: