Chip Stocks Plunge As Orders Dip
Shares of computer chip makers tumbled Tuesday, as analysts cut ratings on six companies and said rising inventory at industry leader Intel Corp. is causing a slowdown in chip orders.
Intel, Cirrus Logic Inc. and four other component makers’ ratings were cut by Merrill Lynch & Co. analyst Tom Kurlak because of a decline in orders. Cirrus said fiscal third-quarter operating profit will fall 15 percent because of a canceled order from an unnamed customer, which some analysts said was Intel.
The reduction in orders doesn’t bode well for other chipmakers because it indicates that sales of some personal computer components are slowing. That signals a decline in demand for PCs just as the industry gears up for the crucial holiday sales season.
“The early Christmas season doesn’t seem like it’s all that great,” said analyst Rick Whittington of SoundView Financial Group.
Intel shares fell 4-7/16 to 65-1/2 on Nasdaq trading of 28.1 million shares, making it the most active issue on U.S. markets. Cirrus shares plunged 12-3/4, or 31 percent, to 28 on Nasdaq trading of 22.4 million shares, more than seven times the daily average in the last three months. Cirrus was the second-most active U.S. stock and the biggest percentage loser.
Other chipmakers who sell components to Intel also fell. S3 Corp. fell 1-3/4 to 14-1/2 and Trident Microsystems fell 1-7/8 to 32-1/8.
Kurlak cut his ratings on Micron Technology Inc., which fell 3-5/8 to 60-7/8 and Texas Instruments Inc., which fell 1-5/8 to 60-7/8. Cypress Semiconductor Corp. fell 2 to 16-3/4 and LSI Logic Corp. dropped 3-1/2 to 41-1/2.
Kurlak also said in his report that the supply of memory chips is starting to catch up with demand, and that inventories of most other components are high.
The deluge of parts on the market comes as the world’s largest chipmakers are laying plans to add more manufacturing capacity because demand has outstripped supply for the past several quarters.
Intel plans to build three new plants, including one near Tacoma.
xxxx LOSING GROUND Among technology stocks falling Tuesday were Intel Corp., down $4.44 to $66.375; Applied Materials $5.125 to $48.75; VLSI Technology Inc. down $2.375 to $20.625; and Lam Research, down $9 to $56.