Still Only One Semiconductor Business? Riiiight...
by Paul McGoldrick
There is no hope for it. The analysts and the press just cannot seem to
get it into their heads that the semiconductor business is not an homogenous
mass whose dynamics always result in torque that goes in the same direction.
And apparently they also have trouble reading press releases…
I just got sent a copy of a story from the San Francisco Chronicle's Business section from Friday June 6, 2003. With a byline by Matthew Yi, the headline is "Chipmakers looking for better days" with a deck that says "Intel lowers forecast; Nat Semi reports loss." The story opens with, "Despite signs of life in other economic sectors, two of Silicon Valley's leading chipmakers said there is still no clear signal that business is improving for the embattled industry."
The use of "embattled" is rather similar to the press use of "Big" when talking of tobacco companies in a pejorative manner; but, journalistic style aside, what is the real story? Intel announced that its second-quarter revenues will be between $6.6 billion and $6.8 billion instead of its previous forecast of $6.4 billion to $7 billion. Instead of a lower forecast, I read that as a fine tuning of the previous numbers, slap in the middle of the previous forecast - it improves the prediction from a near 10% accuracy range to better than 4% and, unusually, the markets also read it the same way and reacted positively, bumping the stock price up a couple of percent.
As for National, it would have made a profit again this quarter if they hadn't had the costs of laying off about 850 workers since February. The conduct of the company recently has been extremely positive with the CEO continuing to speak in public of righting his latest sins - i.e. Internet Appliances - of the, hopefully, past. One hopes that he has no intention of taking off in some other silly direction. Of course the company could have been fiercely profitable years ago if it hadn't continued to disregard its core business of analog, and if it could in the future adopt gutsy pricing structures that would make it a considerably larger profit margin. Nor does it help to get into competition with your own customers. Hopefully, that lesson has also been learned.
"…Still no clear signal that business is improving…" How can you report that with Intel's microprocessor at the higher end of business levels at this time of year, and with National increasing sales a couple of percent over the last quarter, and a 12% increase for the year compared to the last?
The remainder of Intel's sales in communications ICs and Flash memory are small cheese compared with the microprocessor business and are really mostly irrelevant when talking of the future of the company. Intel does tend to play its weaknesses in forecasts and that inevitably results in a jacking up of the stock price at the end of the next quarter, when the weak areas show they had little effect on the whole.
Although the future of National's chairman/president/CEO is still very much in contention - a much better story, and he is the "embattled" one - this kind of copy from the Chronicle is just another situation where the writer doesn't understand the two different industries that he tried to push into one piece of work. I continue to sue for understanding at every opportunity that I get but there seem to be a lot of deaf ears out there. I'll try not to give up hope.