Semiconductor Names Levered to Mobile, Cloud Computing Expected to Dominate: a Wall Street Transcript Interview with Betsy Van Hees, Vice President of Equity Research at Wedbush Securities

Wall Street Transcript

67 WALL STREET, New York - October 1, 2012 - The Wall Street Transcript has just published its Semiconductors Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Semiconductor Capital Equipment - Cloud Computing - Mobile Device Consumer Demand - Enterprise Data Storage Demand - High Computing Power Technology - Semiconductor Inventory Burnoff

Companies include: Advanced Micro Devices Inc. (AMD), Atmel Corp. (ATML), Broadcom Corp. (BRCM), Cavium Networks, Inc. (CAVM), Cypress Semiconductor Corporat (CY), Integrated Device Technology I (IDTI), Intel Corporation (INTC), LSI Corporation (LSI), Micron Technology Inc. (MU), NVIDIA Corporation (NVDA), ON Semiconductor Corp. (ONNN), OmniVision Technologies Inc. (OVTI), STEC, Inc. (STEC), Texas Instruments Inc. (TXN), Apple Inc. (AAPL)

In the following excerpt from the Semiconductors Report, an expert analyst from Wedbush discusses her top stock picks for the sector for investors:

TWST: Would you begin with a brief overview of your coverage of the semiconductor sector, including some of the specific names you follow?

Ms. Van Hees: I am the lead semiconductor Analyst here at Wedbush Securities. I cover the entire space. My coverage list includes AMD (AMD), Atmel (ATML), Broadcom (BRCM), Cavium (CAVM), Cypress (CY), Integrated Device Technology (IDTI), Intel (INTC), LSI (LSI); Micron (MU), NVIDIA (NVDA), ON Semiconductor (ONNN), OmniVision (OVTI), STEC (STEC) and Texas Instruments (TXN).

TWST: Your coverage is fairly broad, and you have "neutral" ratings on several stocks. Do those "neutral" ratings point to industry trends or are they more company specific? And what changes will you be looking for to consider upgrades to some of these stocks?

Ms. Van Hees: The semiconductor industry has been going through a challenging time largely due to weakness in the overall economy, which has pressured companies' earnings and revenue. We have also seen an issue with inventory across the entire group and in memory, particularly DRAM. We have seen several months of DRAM supply exceeding demand. So yes, we do have several "neutral"-rated stocks because what we have been focusing on are stocks that are tied to what we believe are a couple important sectors - the consumer, particularly mobile devices, and cloud computing. We think those are the two sectors - especially in the second half of the year, with Christmas right around the corner - that will outperform.

And so that's how we are looking at the semi space today, and why some of our stocks are "outperform" rated and others are "neutral," because we think companies that are levered to those sectors will likely outperform the market.

TWST: Would you go into more detail about the customer end markets as far as consumer products and cloud computing that you believe represent the best opportunities for semiconductor companies? And then, which are the companies that have the best exposure to those end markets?

Ms. Van Hees: One would think that these are two separate categories, but they are very much entwined with the consumer being very important to cloud computing. We think the consumer will be buying mobile devices like smartphones, feature phones and tablets this Christmas season, and we don't think it ends at Christmas. We think consumers will continue to gravitate to those products for several years. We think that the purchasing of these devices by the consumer will in turn drive the need for increased bandwidth. The need for more bandwidth will push service providers to upgrade to 4G technology from 3G, and in the emerging markets, more 3G technology will need to be deployed, which will drive what we call the wired and wireless infrastructure buildout.

We also think that the consumer is going to want seamless connectivity across all devices, like tablets, smartphones, set-top boxes, DVD players, computers and gaming systems. We believe that this will drive the need for not only more servers and storage devices, but better performance out of these applications with more networked devices accessing storage and running applications off the cloud. So as you can see, the consumer plays a very important role in cloud computing.

We think the stocks that are best positioned to benefit from these trends, not only in the second half of the year but into 2013, are Broadcom, Cypress Semiconductor, LSI, Micron and NVIDIA.

TWST: If I'm an investor who wants some exposure to the semiconductor sector, which two or three stocks would you recommend as a best bet at this point?

For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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