Estimates Cut on Some Semis

Pacific Crest’s Michael McConnell Monday cut his earnings estimates for Advanced Micro Devices (AMD), Intersil (ISIL) and Texas Instruments (TXN), cautioning that semiconductor distributor resales are tracking at the lower end of normal seasonality of flat to down 10% in the fourth quarter. McConnell says the distributors are seeing slower demand from Chinese handset and communications infrastructure customers as well as U.S. industrial customers. McConnell says chipmakers are likely to report book-to-bill ratios below 1.0 in both the fourth quarter and the first quarter.

McConnell notes that Taiwanese analog IC providers had “unexpected double-digit month-over-month declines in revenue in October and November,” due to cancellerations from both notebook contract manufacturers and motherboard companies. Taiwanese analog IC companies are expects Q4 revenue to decline 10%-20% sequentially; he says they had previously expected flat growth.

On the other hand, he says first-tier notebook contract manufacturers see units up 8% sequentially in the current quarter, above previous expectations of 6%, with a decline of 5%-10% in the first quarter, versus normal seasonality of a 10% decline.

For AMD, McConnell says his cautious outlook has been reinforced by product pushouts and share loss at Toshiba and Dell. For 2008, he now sees revenue of $6.9 billion, down from $7.4 billion, and a loss of $1.48 a share, compared with a previous estimated loss of $1.05. McConnell notes that with a tangible book value of $1.73, and a historical trough book-to-bill of 2.2x, he says downside risk remains “material.”

For Intersil, he cut his target to $31 from $38. He maintains an Outperform rating on the stock. But he sharply cut estimates. For ‘08, he now sees $840.9 million in revenue and EPS of $1.54, down from $880 million and $1.67.

For Texas Instruments, he says checks indicate wafer shipments forecats at supply-chain partners are down sequentially by high-double-digits. He says the company is losing market share with Ericsson and Nokia. For 2008, his revenue estimate drops to $14.25 billion, from $14.48 billion; EPS goes to $2, from $2.06. He keeps his Sector Perform rating on the stock.

Monday morning, AMD is down 16 cents at $8.27; Intersil is up 6 cents at $24.06, while Texas Instruments is ahead 8 cents at $33.37.