Semiconductor Sector Growth Predictions Urge Caution on Stock Picks: a Wall Street Transcript Interview with Brendan Furlong, Technology Analyst at Miller Tabak + Company

Wall Street Transcript

67 WALL STREET, New York - October 5, 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: Intel Corporation (INTC), Apple Inc. (AAPL), Maxim Integrated Products Inc. (MXIM), Broadcom Corp. (BRCM), Marvell Technology Group Ltd. (MRVL), PMC-Sierra Inc. (PMCS), and many others.

In the following excerpt from the Semiconductors Report, an expert analyst discusses the outlook for the sector for investors:

TWST: You've recently become more cautious on the semiconductor sector. What are the factors contributing to your more cautious view?

Mr. Furlong: I think the macroeconomy is weighing on the whole sector. We started off the year reasonably OK, and then the June quarter, we kind of got the heads-up. Going into the June quarter, I cut all my numbers across my coverage universe, and the June quarter ended up being weak, but now it actually looks like September is going to be weak as well. I think companies may now struggle to make the September quarter guidance, by and large.

But weakness appears to be coming pretty much across the board. PCs are extremely weak. Obviously, Intel (INTC) preannounced last week, but my sense from talking to various parts of the channel and what have you, the September quarter is going to come in weak across the board for all of my coverage group and all the semiconductor stocks.

TWST: Last time you spoke to us, you viewed smartphones, the buildout of the service provider network and cloud computing as the biggest growth areas for semiconductor companies. Is growth still robust in each of those areas? Have any new segments emerged as representing growth opportunities for the sector?

Mr. Furlong: My thought process is still more or less the same. I think the safe area - if there is such a thing as a safe area these days - is in smartphones, because it remains the only growth area that's out there. But then even within that, it's now a subset of growth because, unless you're leveraged to Samsung (005930.KS) and Apple (AAPL), you're being left by the wayside. So smartphone growth remains strong as long as you're exposed to those two large OEMs.

Service provider markets, I think, are weak because the macroeconomy is pretty weak. It has not rebounded the way I would have thought, and it doesn't appear to be going to rebound into the end of the year. So that continues to be an area that's pretty soft.

I think the cloud computing market remains a growth area. It's growing, but maybe not at the rate that it was. I think there's evidence that I'm looking at that there's a slowdown in server sales, that's the cloud-computing-type environments. I think corporate IT spending generally is slowing down, and that's impacting the broader markets.

TWST: How are inventory levels trending right now, and what are the implications of those trends for the sector?

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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