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Semiconductor Industry Woes Continue As Texas Instruments (TXN); Altera (ALTR) Cuts Q1 Outlook

 March 09, 2012 09:28 AM

With the reduction in the first quarter outlook by semiconductor companies Texas Instruments (NYSE: TXN) and Altera (NYSE: ALTR), seems as if the signals are flashing red light. Both, companies have cited weak demand from the wireless products. It will not be a surprise if other companies in the industry such as Intel (Nasdaq: INTC), STMicroelectronics (Nasdaq: STM) and AMD (Nasdaq: AMD)  make a similar announcement.

[Related -Intel Corporation (INTC) and 5 Other Stocks That Could Pop on Earnings This Week]

Semiconductor Intelligence is expecting a decline of 5 percent in the semiconductor market during the first quarter. The forecasted downside is slower than the 7.7 percent drop witnessed during the fourth quarter of 2011. The first quarter fall would place additional pressures on the industry to reverse the trend to report any positive growth in 2012.

This may prove to be a tough one given the continued uncertain economic conditions. Apart from this, various researchers also project world economy to witness slower growth in 2012. Therefore, even with an average 5 percent of growth during the last three quarters of 2012, Semiconductor Intelligence sees a one percent decline in the semiconductor market for 2012.

[Related -Intel Corporation (INTC) Q4 Earnings Preview: Room To Pop On EPS]

The research firm further pointed out several companies have projected revenues to fall sequentially in the first quarter. TXN said the revenues might fall 11.7 percent - 4.1 percent sequentially. Now, the company has further cut its revenue outlook to 12.57 percent – 9.06 percent due to weak demand. The forecasted revenue is between $2.99 and $3.11 billion compared to earlier guidance of $3.02 - $3.28 billion. The company delivered revenues of $3.42 billion during the fourth quarter.

The company also reduced its earnings forecast to 15 – 19 cents a share from 16 – 24 cents a share projected earlier. Analysts are expecting the company to earn 31 cents a share on revenues of $3.16 billion.

Similarly, Altera (Nasdaq: ALTR) has also reduced its revenue estimate to 7 – 9 percent sequentially from 5 – 9 percent projected during the time of the fourth quarter results. This implies that the company would generate revenues of $416.6 - $425.75 million for the first quarter. Street analysts' expect the company to deliver revenues of $427.11 million.

The most significant aspect from the two companies is that they have expressed confidence in reporting quarter-over-quarter growth during the second quarter. This could be a sign of easing the weak demands or improved economic situations.

Intel also projected first quarter revenues to fall 11.4 – 4.2 percent from the fourth quarter, while AMD has predicted first quarter revenues to slip 11 – 5 percent from the previous quarter. STMicroelectronics guided first quarter revenues to drop 10 – 4 percent, whereas Broadcom (Nasdaq: BRCM) saw first quarter revenues skid 6.6 – 1.1 percent over the fourth quarter. But Qualcomm (Nasdaq: QCOM) projected revenues to fall 1.7 percent at the worst, but predicted 6.8 percent growth at the best.

The flood in Thailand will also impact negatively on the industry. This quarter might prove to be a tough one, since production in many plants  stopped after the middle of October, which resulted in short supply of hard disk drive as well as chips.

Semiconductor Intelligence believes that if the world economic condition deteriorates, then  the industry might experience further downhill. Interestingly, most of the other research firms see positive signs for the semiconductor industry with Gartner projecting 2.2 percent growth and Future Horizons indicating 8 percent growth for 2012.


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