Asm Intl Nv (LSE:ASMI)
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From Jun 2019 to Jun 2024

TAKING THE PULSE: There are signs that European semiconductor companies have seen the worst of the economic downturn that has led to slumping demand in the industry, but analysts remain cautious about whether there will be any sustained recovery in the second half of the year.

"The raft of positive pre-announcements within global peers in the second quarter should leave investors expecting upside for European semiconductor fundamentals," said UBS analyst Nicolas Gaudois in a recent research note. "We believe, however, that third quarter guidance could be more nuanced."

The sustainability of any upturn is key and will depend on improved consumer demand and the key back-to-school and Christmas periods.

Last week, Bank of America upgraded Intel Corp. (INTC) the world's No. 1 maker of computer microprocessors, and other chip companies, citing "definitive signs of a turn in demand." Intel is set to report its results July 14, kicking-off the tech earnings season.

Intel in early April said sales of personal computers had bottomed out during the first quarter. Switzerland-based STMicroelectronics NV (STM) at the same time said the company saw improvements in sales to the wireless sector, and in Asia.

Analysts expect Intel to report earnings of 7 cents a share on revenue of $7.2 billion, according to a Thomson Reuters survey. That remains well below prior-year results, when Intel reported earnings of 28 cents a share on revenue of $9.5 billion.

German semiconductor company Infineon Technologies AG (IFX.XE) late June raised its third quarter outlook, saying it now expects operating profit, excluding items, to be near break even while sales are expected to grow by a low-teens percentage range compared with the second quarter. Still, Infineon maintained its relatively grim full-year outlook.

Infineon last week resolved its refinancing concerns through a EUR725 million rights issue and an asset sale, which should mean it can now refocus on strategy.

COMPANIES TO WATCH

---- ASML Holding N.V. (ASML.AE) ---- (July 15)

MARKET EXPECTATIONS: Analysts expect ASML's second quarter order intake to improve, and several have raised their price targets on the stock ahead of the earnings release. Bank of America-Merrill Lynch expects sales of EUR219 million, up from EUR184 million in the first quarter, and for its operating loss to narrow to EUR139 million from EUR147. It expects a EUR112 million net loss, slightly narrowed from a EUR117 million loss in the first quarter.

MAIN FOCUS: Dresdner Kleinwort says that the recovery in orders and bottoming out of the semiconductor market is well reflected in ASML's share price and doesn't expect significant upside amid caution about the pace of recovery. Bank of America-Merrill Lynch doesn't expect the next step of recovery for ASML to come before 2011. Meanwhile, UBS says it expects ASML's orders to accelerate strongly into the third quarter, partly as customers use recent refinancing to catch up on technology investments.

---- Wolfson Microelectronics PLC (WLF.LN) ----- (July. 28)

MARKET EXPECTATIONS: Citigroup expects second quarter sales of GBP31 million, down over 40% year-on-year, but up 23% on the previous quarter due to restocking. Positive news from distributors on handset and LCD TV volumes in the quarter could mean better-than-expected volumes for Wolfson. The loss of the iPhone 3GS contract has hit the share recently but retaining its 3G business should help handset volumes.

MAIN FOCUS: The market will focus on the contract order book, which has been Wolfson's only guidance metric since it declined to issue full year forecasts for 2009. Any more clarity on outlook would be widely welcomed. The group's cash position is a perennial focus as it has committed to maintaining positive cash flow. The company has cut costs to protect cash, lowering its cash breakeven level to around $130 million a year.

---- ARM Holdings PLC (ARM.LN) ---- (July.28)

MARKET EXPECTATIONS: Citigroup expects second quarter sales of GBP69.4 million, down on both the prior quarter and the previous year. ARM's royalty revenue is paid a quarter in arrears so the decline in sales reflects the sharp contraction in the semiconductor industry in the first quarter. Licence sales have also been hampered by the recession to some extent, as companies are reluctant to sign off invoices despite the need to maintain a solid pipeline of new products.

MAIN FOCUS: Analysts believe the second quarter will be the trough for earnings and will look for signs of improvement in royalties in the period which will reflect well on third quarter earnings. Still, license sales will be closely watched for a weakening trend as most semiconductor companies remain cautious because of weak consumer demand.

---- STMicroelectronics (STM) ---- (July 28)

MARKET EXPECTATIONS: Analysts expect STMicroelectronics' second-quarter revenue to come in above consensus and at the high end of the company's "internal planning target" range of $1.73-$1.93 billion after chief executive Carlo Bozotti in May said he expected second-quarter revenue to be above the mid-range of guidance, and following recent upbeat guidance from peers including Infineon (IFX.XE) and Texas Instruments (TXN).

However, the improvement in revenue won't have translated into a margin improvement yet, analysts say. The group focused on reducing inventories in the second-quarter, leading it to lower production and a narrower gross margin, possibly down to a low of 26%.

MAIN FOCUS: Comments on third-quarter outlook will be key. Some analysts say guidance for the third quarter could be more nuanced due to signs of a slowdown in re-stocking and because end-demand is likely to remain mixed. STMicro is expected to again provide a wide range for an "internal planning target" for the next quarter, encompassing current consensus. Analysts are look for confirmation that output will improve and that cost-cutting is on track.

---Infineon Technologies AG (IFX.XE) ---- (July 29)

MARKET EXPECTATIONS: Infineon said it expects sales growth in the low teens in the fiscal third quarter compared with the previous quarter and near breakeven operating profit, excluding items.

MAIN FOCUS: As Infineon solved its refinancing problems, which have been a major concern for analysts in recent months, the focus will shift to full-year and fourth quarter guidance.

---- ASM International N.V. (ASMI) ---- (July 29)

MARKET EXPECTATIONS: The rate of sales decline at ASMI's front-end wafer-processing division is expected to slow to 10% compared with the 37% slump in the first quarter, according to Bank of America-Merrill Lynch analysts. Its operating loss is also expected to narrow to EUR21.3 million form EUR24.8 million in the previous quarter.

MAIN FOCUS: Markets will expect an update on ASMI's restructuring program. Refinancing could become an issue as the company has two convertible bonds outstanding; one for EUR125 million due May 2010, and another for EUR91 million due December 2011.

-By Archibald Preuschat, Dow Jones Newswires, +49 211 138 7218, archibald.preuschat@dowjones.com

(Kathy Sandler in London and Ruth Bender in Paris contributed to this report.)