It only took a dose of stabilization to help chip stocks Tuesday.
On the list of companies to thank is
. Among the recipients of this cautious investor optimism is
, which is due to give its first mid-quarter update on Thursday after the close of regular trading.
Xilinx, the maker of programmable logic devices, or PLDs,
said Monday that the fiscal first quarter ending this month is shaping up pretty much as anticipated, with revenue expected to fall 15% to 25% from the March quarter. PLDs are chips that customers, namely communications companies, can program themselves. Moreover, the company said that turns -- the ratio of sales to inventory -- improved during May and that delays and cancellations slowed.
For investors, it seems to matter little that Xilinx's revenue is declining. What matters is that Xilinx's news indicates the downward spiral didn't continue in May. And if things aren't getting worse, it could mean the much-anticipated bottom of the cycle has arrived. That's something investors have been looking for among semiconductor companies and, in particular, suppliers to the weak telecommunications sector. A combination of high inventories and light demand in end markets from personal computers to communications has been hurting semiconductor revenue for the past few quarters.
Xilinx shares recently were up 11%, while competitor
, which just last week
warned that revenue would fall more than expected this quarter, also was on a run, gaining 12%.
The stocks may be rising, but analysts are hedging their bets. Dan Niles at
said in a research note that the news is being viewed as positive but warned that the quarter isn't over. "The real key will be June given almost 40% of revenues still need to be done. June's momentum will also drive the guidance for the third calendar quarter," Niles wrote. (Lehman hasn't done underwriting for Xilinx.)
The Xilinx outlook added to the growing warm fuzzy feeling in the chip sector from last week when chip equipment maker
surprised some investors by
sticking to its guidance for the June quarter.
And it comes at the same time that some analysts are growing more newly confident that the granddaddy of chip stocks, Intel, may get by without an earnings warning during its mid-quarter update Thursday.
That notion has been buoyed by PC-friendly news from Taiwanese chipset maker
, which last week called the second quarter its trough quarter, according to
Salomon Smith Barney
analyst Jonathan Joseph. Chipsets are used in personal computers in conjunction with microprocessors.
Joseph said in a research note late Monday that he expects Intel to reiterate guidance for revenue of $6.2 billion to $6.8 billion and its outlook for the second half to be up from the first half. That's similar to comments from
analyst Terry Ragsdale, who said in a note Monday that it expects Intel to stay within its guidance range. (Neither Salomon or Goldman has done underwriting for Intel.)
Goldman's Ragsdale was a bit more guarded than Salomon though, saying that the company could cut off the top of its guidance range during the Thursday call. He also pointed out that nearly all data coming out of the personal computer sector has been negative since Intel gave its guidance on April 17.
But Eric Ross, an analyst at
Thomas Weisel Partners
, said that he expects Intel to lower its revenue guidance to $6.1 billion. (Weisel Partners hasn't done underwriting for Intel.) And there has been
plenty of speculation about coming chip warnings.
But for the moment, chip investors are basking in the stability.