SAN FRANCISCO -- It's not me, it's you.

Making no attempt to dance around a delicate market situation,

Robertson Stephens

analyst Eric Rothdeutsch framed the week's chip presentations at his firm's tech conference here with a simple let down: things aren't getting better. Rothdeutsch doused the audience with the cold reality that a second wave of earnings warnings is coming, inventory is still piled up on shelves and the rosiest he can possibly be is to hope that the wireless and PC sectors will pick back up in the second half of 2001.

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No, we can't even be friends. And no, I'm not giving any of your stuff back.

"We have another leg down to go in terms of the correction," he said, adding that the big question mark still out there was the extent to which the second quarter would suffer. To spin things positively, he is hopeful that the PC sector will lift up its chin in the second half of the year, if only because PC sales have been depressed for so many quarters.

Ditto for the wireless handset business, which showed its slowdown last summer with a

Nokia

(NOK) - Get Report

warning. A few quarters living off of backed-up inventory could clear the channels in two quarters. Additionally, Rothdeutsch holds out strong hope for a "multi-year upcycle" following the current wireless slowdown because of the relative immaturity of the market. He anticipates a 25% to 30% growth rate in wireless handsets in 2001.

The analyst provided little hope, however, for the wireline business flattened by

Cisco's

(CSCO) - Get Report

recent earnings miss. Cisco's insistence that business was fine until December hints that it will "take another few quarters for wireline inventory to burn off," according to Rothdeutsch.

You'll find nothing but gray clouds hovering over the PC-dependent DRAM environment, as well, which Rothdeutsch gives "limited upside" because "pricing is on a straight downward spiral." In other words, DRAM companies are selling DRAM for below cost.

Moving from the macro bad news, Rothdeutsch go to the micro bad news. He displayed restrained hopes for a PC industry, given that's looking for a jumpstart from not-so-popular

Microsoft

(MSFT) - Get Report

Windows 2000

and an underperforming

Intel

(INTC) - Get Report

Pentium 4

chip. Rothdeutsch lamented that Intel sacrificed some Pentium 4 positives to get the chip manufactured, leaving a 1.4 GHz P4 struggling to keep up with

AMD's

(AMD) - Get Report

1.0 GHz chip.

In its reaction to trying times,

Dell

(DELL) - Get Report

squeezed extra revenue out of cheap-ticket consumer sales, which Rothdeutsch expects to hurt the computer maker's gross profit margins. He also expects Dell to announce layoffs of 2,500 with its quarterly earnings report Thursday. Rothdeutsch prefers

Compaq's

(CPQ)

higher margins to Dell's and AMD's better performance and reluctance to slash prices on its high-end chips. (Robertson Stephens hasn't done underwriting for the companies mentioned in this story.)

We just need some space right now. That's all. I don't want to change you. You've got to want to change yourself.

Altera

(ALTR) - Get Report

CFO Nathan Sarkisian lent some weight to Rothdeutsch's picture of inventory unclogging, explaining that Altera's wafer orders take three to four months for its manufacturers to complete. In the fourth quarter, he relates, "the business decayed rapidly." He shut off orders, but anything placed in the prior three to four months kept coming. In the first quarter, he stacked it all up as inventory. And he's just now entering a period of reaction, considering whether to purchase for the second quarter.

The cup is half full. "We didn't see serious de-bookings," answered

National Semiconductor's

(NSM)

Pat Brockett. "We saw a lack of bookings."

Well, that's leaning toward good, right?

Having been through all this before, the executive vice president of National's analog division walked the audience through what will eventually be a chip market recovery. "These things never solve themselves in one quarter," he explained. "It will take through the summer to clear." Then National will be looking for quicker inventory turns and constrained supply in the spot market. Then, and only then will the chip sector be on its way up.

In the meantime, National is as positive about its chances as are all the industry giants here. While every small fry benefits from a growing industry, Brockett argued that in a downturn customers will stick with only their favorite manufacturing suppliers.