Sinking Chips: How Far Til the Bottom?
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The search for the chip-sector bottom continues later today with
Micron Technology's
(MU) - Get Report
earnings statement and the release of new order levels for May at semiconductor-equipment makers.
Chip investors for weeks have scrutinized each piece of information and wondered whether the bottom had arrived. While timing the bottom is key in making any investment, it's especially important in the chip sector. Semi stocks take off quickly when fundamentals begin to improve, so investors who move too slowly miss out on making money.
But each time the bottom has seemingly approached, another crevasse has instead appeared. Micron could provide some direction to investors, though it may not be what they want to hear for the short term. Analysts already are taking down their estimates as the memory maker suffers from depressed prices and steep inventories. (
TSC
earlier today
looked at the prospects for Micron's report.)
Meanwhile, chip-equipment orders were awful in April, which was the
most-recent report. The book-to-bill ratio came in at 0.42, which showed that $42 in new orders were received for every $100 of products shipped in April.
Some saw this as a sign of the bottom. And this time around, the ratio could come in at 0.55 to 0.60, figures
Credit Suisse First Boston
.
But CSFB cautions against betting on the bottom now. "One month does not a trend make," the firm says today. "Even if May shows a slight uptick, keep in mind that historically bookings do not always go straight down to a trough. In April/May 1998, bookings increased 6% sequentially after four straight down months, but was followed by an additional five months of double digit sequential declines."
The firm sees the third quarter as more likely being the bottom.