Falanx Cyber Security (LSE:FCS)
Historical Stock Chart

From Jun 2019 to Jun 2024

Not all chip makers can expect to see a recovery matching Intel Corp.'s (INTC) outlook for the rest of the year.

As suggested by the results from analog players Fairchild Semiconductor International Inc. (FCS) and Cypress Semiconductor Corp. (CY), chip makers that sell semiconductors for cars, phones and industrial machines may not recover as quickly as those chip makers focused primarily on computers. That could lead to a tempered view of other earnings results, including analog giant Texas Instruments Inc. (TXN), even if numbers demonstrate strength.

"For the analog guys, they are very diversified, very broad," said ThinkEquity chip analyst Vijay Rakesh.

"Yes, they are seeing strength, they are seeing things improving," but not at the pace of the PC market, he said.

TI was not immediately available to comment.

On Thursday, Fairchild topped Wall Street expectations with its third-quarter results and fourth-quarter outlook, and Cypress beat estimates for last quarter despite swinging to a loss. But despite optimistic reports, shares of both chip makers fell Thursday, with Cypress down 1.4% to $10.14 and Fairchild dropping 7.5% to $8.90.

Additionally, other analog chip makers also saw drops. Texas Instruments, scheduled to release its third-quarter results Monday, fell 1.3% to $23.32. RF Micro Devices Inc. (RFMD), set to report Oct. 27, fell 5.8% to $4.55.

While chip makers like Intel and Advanced Micro Devices Inc. (AMD) primarily sell to customers in a few specific parts of the technology market, analog chip makers sell products used in hundreds, sometimes thousands, of applications across all parts of the economy.

And while Intel serves as a bellwether for technology spending in general, its outlook for the current quarter, analysts say, may not accurately reflect what's going on across the semiconductor market.

For one, the PC market appears to be recovering much faster than many expected. In the third-quarter, global PC shipments rose 0.5% from the same period last year, according to research firm Gartner Inc., besting estimates that called for a 5.6% decline. PC shipments rose 18% from the second-quarter as well, higher than the normal seasonal growth between the two quarters.

The growth in PCs, and expectations by manufacturers that Microsoft Corp.'s (MSFT) release of its new Windows 7 operating system next week will help drive PC sales through the important holiday period, led Intel to project sales for the current quarter jumping roughly 7.6% from the third-quarter, much higher than Wall Street expected.

But the recovery in analog revenue will likely take a bit longer.

"A lot of the analog guys often have a lot of industrial and infrastructure equipment in it, and that seems to come up later than computing," said Steve Smigie, analyst with Raymond James. He added, however, that the stocks of analog chip makers normally don't wait for the revenue to catch up to others in the sector.

But for TI and others reporting earnings soon, strong outlooks may not cause a stock jump after the blowout earnings of Intel. Chip enthusiasm could be weighed down by less-than-stellar results from customers.

Smigie pointed to Nokia Corp. (NOK) as one example. Shares of the mobile phone maker fell 11% to $13.64, after disappointing investors with its third-quarter report.

-By Jerry A. DiColo; Dow Jones Newswires; 212-416-2155; jerry.dicolo@dowjones.com