Good News and Timing Have Investors Choosing Comm Chips
Chip investors are getting itchy.
A combination of positive economic indicators, a critical support point in the movement of the Philadelphia Stock Exchange Semiconductor index and good quarterly updates from Texas Instruments (TXN), Xilinx (XLNX) and Altera (ALTR) have investors buying up communications chip makers. On top of that, the Semiconductor Industry Association put out January numbers Tuesday morning that included a sequential decline in business from December but signaled a much more favorable year-over-year comparison than the chip industry has seen in many moons. There's nothing individually earth-shattering to boost component makers, but taken together there is enough to convince chip investors on the verge to pull the trigger.
Tuesday a motley gang comprised of Vitesse (VTSS) (+8%), Broadcom (BRCM)(+7%), Anadigics (ANAD) (+8%), Applied Microcircuits (AMCC) (+4%) and Lattice Semiconductor (LSCC) (+5%) maintained strong moves into positive territory. Not quite implicated in last week's Altera (ALTR) mid-quarter update or Xilinx's (XLNX) upside preceding guidance revision, the companies benefit nonetheless from the revelation that inventories at customers such asCisco (CSCO) have finally cleared.
Morgan Wedbush's David Wu insists that there's no pickup in communications end markets driving the stock moves. "Cisco, Lucent (LU), Nortel (NT), Juniper (JNPR) -- none of them are saying great things," he explains, which leads him to believe that sequential progress in revenue means inventory has cleared out of those vendors' warehouses. Given that investors have been ready for months to jump in once signs of a chip recovery appear, the end to the inventory glut has spurred some investors to action.
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