Semiconductors have had a difficult time as PC makers and chipmakers have warned about the next two quarters. Demand for silicon chips has been slowing, and with profits set to shrink,

Merrill Lynch

analyst Brett Hodess reduced his intermediate-term view on a dozen companies, but maintained a long-term buy on the industry as a whole.

"We are reducing intermediate-term ratings on the front-end process semiconductor-equipment stocks where our estimate reductions imply that the downside risk is still not recognized," Hodess wrote.

These chips were taken down by Hodess:

  • Advanced Energy (AEIS) - Get Report: DOWN to neutral from accumulate.
  • Applied Materials (AMAT) - Get Report: DOWN to neutral from accumulate.
  • Asyst Technology (ASYT) : DOWN to accumulate.
  • Cymer (CYMI) : DOWN to neutral from buy.
  • ElectroScientific (ESIO) - Get Report: DOWN to accumulate from buy.
  • Entegris (ENTG) - Get Report: DOWN to accumulate from buy.
  • KLAC/Tencor (KLAC) - Get Report: DOWN to neutral from accumulate.
  • Lam Research (LRCX) - Get Report: DOWN to neutral from accumulate.
  • Metron Technology (MTCH) - Get Report: DOWN to accumulate from buy.
  • Novellus Systems (NVLS) : DOWN to neutral from buy.
  • PRI Automation (PRIA) : DOWN to neutral.
  • ThermaWave (TWAV) : DOWN to accumulate from buy.

But Merrill wasn't the only firm to cut ratings on the semiconductor equipment industry.

Salomon Smith Barney

was also making moves today, with its analyst Glen Yeung, who cut his buy ratings on eight companies:

  • Applied Materials: DOWN to neutral.
  • Axcelis Technologies (ACLS) - Get Report: DOWN to outperform.
  • Credence Systems (CMOS) : DOWN to outperform.
  • ElectroScientific: DOWN to outperform.
  • Entegris: DOWN to outperform.
  • KLAC/Tencor: DOWN to neutral.
  • Lam Research: DOWN to outperform.
  • Novellus Systems: DOWN to outperform.

Downgrades

Eastman Kodak

(EK)

: DOWN to neutral from outperform at Salomon. DOWN at

Credit Suisse First Boston

, 4Q EPS to 70 cents from $1.06, 2001 EPS to $4.65 from $5.10.

General Motors

(GM) - Get Report

: DOWN to buy from strong buy at

UBS Warburg

, price target to $60 from $74.

Microsoft

(MSFT) - Get Report

: DOWN to hold from accumulate at

Prudential Securities

.

STMicroelectronics

(STM) - Get Report

: DOWN to buy from strong buy at CSFB, price target $65 from $80.

Initiations

Amdocs

(DOX) - Get Report

: NEW buy at Salomon; price target: $80.

Montesano

(MON)

: NEW buy at UBS Warburg; price target: $35.

Plantronics

(PLT) - Get Report

: NEW accumulate at Merrill; price target: $54.

Group Moves

Lehman Brothers

started a whole host of hosters today, focusing on a variety of names in the Internet connectivity sector:

  • Akamai Technologies (AKAM) - Get Report: NEW outperform, price target $55.
  • Digex (DIGX) : NEW buy, price target $52.
  • Genuity (GENU) : NEW outperform, price target $8.
  • Interliant (INIT) : NEW outperform, price target $14.
  • InterNAP Network Services (INAP) - Get Report: NEW outperform, price target $25.

Merrill Lynch analyst Steve Haggerty adjusted his intermediate-term ratings on a wide variety of auto-parts makers and suppliers, most of which have been under a great deal of pressure lately as automobile sales have slowed.

In a note to investors this morning, he wrote: "Based on the 1994/95 experience, the potential for a rally in the auto sector if the

Federal Reserve

cuts rates will be marginal and limited in duration. We also believe that this late in the auto cycle, any short-term upside will be muted."

That's not very good news. Here are the companies affected by his changes:

  • American Axle (AXL) - Get Report: DOWN to neutral from accumulate.
  • ArvinMeritor (ARM) : DOWN to neutral from accumulate.
  • BorgWarner (BWA) - Get Report: DOWN to neutral from accumulate.
  • Cooper Tire (CTB) - Get Report: DOWN to neutral from accumulate.
  • Delphi (DPH) : DOWN to accumulate from buy.
  • Visteon (VC) - Get Report: DOWN to neutral from accumulate.