Glut Lives As Chip Sales Slip From Q4 on Lower Prices
By Tolkoff, Sarah
TTM Sees Gain From Tyco Circuit Board Acquisition; Software Maker’s Suit Headed to Trial TECHNOLOGY
The chip slump thai started last year lingers on.
Global chip sales fell 6.5% in the first quarter from the fourth, according to San Jose-based trade group the Semiconductor Industry Association.
The problem-too many unsold chips and falling prices.
Sales for the period were $61 billion, off from $65,2 billion in the fourth quarter. Sales were up about 3% from a year earlier.
“Even with the continued strength in unit sales of personal computers, mobile phones and other portable consumer electronics, an abundant supply of chips for these applications resulted in declining average selling prices as manufacturers sought to hold on to market share,” said George Scalise, association president.
The average sales price for a computer fell to $850 in the first quarter, according to the report. That put pressure on chipmakers to lower their prices.
Industry watchers are concerned that chip sales are becoming increasingly tied to the economy as a whole, according to the report.
China’s tech sector is seeing slower growth than in recent years. In the U.S., higher gas prices are eating into consumer spending on electronics.
All of these factors “are causes for caution concerning the near- term outlook for the semiconductor industry,” Scalise said.
Irvine’s Broadcom Corp., which received props for its handling of the chip slowdown, in late April said it had a murky outlook for the current quarter.
“Mixed outlooks from a few of our larger customers are causing a lower lhan normal level of visibility into our near-term results,” Chief Executive Scott McGregor said.
The company saw its first-quarter profit plunge by nearly half from a year earlier. Revenue was flat.
The chip glut has had analysis keeping a close eye on Broadcom’s inventory.
It was turning stockpiles of chips into sales at a rate of 8.6 in the first quarter, down slightly from 8.8 in the fourth quarter, according to McGregor.
The company reduced its inventory by $2.4 million from the fourth quarter to $200.4 million.
Circuit Board Surge
Shares of Santa Ana circuit board maker TTM Technologies Inc. soared some 30% earlier this month after the company’s earnings beat estimates.
TTM posted first-quarter profits of $8.5 million, down 3% from a year earlier. But the results surpassed analysts’ estimates of $6.3 million.
The company is seeing gains from its $226 million buy of Tyco International Ltd.’s circuit board business, which closed in October.
Quarterly sales rose 143% to $32.7 million. The quarter was the first full one to include operations for the Tyco unit.
To most investors, the Tyco buy was a smart deal with immediate payoff of added customers and sales.
The Tyco division “brought in a fresh crop of customers, shifting the combined company’s revenue mix away from computers and peripherals in favor of aerospace and defense,” according to a report by stock adviser The Motley Fool.
Customers including Lockheed Martin Corp. and Raytheon Co. are seen as “an attractive bunch by any measure,” Motley Fool said.
Other big TTM customers include Motorola Inc., Nokia Corp., Cisco Systems Inc. and Apple Inc.
For the current quarter, TTM sees sales of $ 158 million to $ 167 million and profits from $5.5 million to $8 million in the second quarter.
The forecast is below what Wall Street had expected because of the recent closure of a TTM plant in Oregon.
Court Fight
A federal judge in Santa Ana has set a trial date for an unfair competition case brought by Foothill Ranch-based software company Decision Point Systems Inc.
The case against Sunnyvale-based Trimble Navigation Ltd.’s MobileTech Solutions Inc. is set to go to trial in November.
Mark Romeo, a partner in the Orange County office of Pillsbury Winthrop Shaw Pittman LLP, is representing Decision Point, which went by Creative Concepts before buying Shellon, Conn.-based Sentinel Business Solutions Inc. a year ago.
The suit alleges a disgruntled former worker raided Decision Point for resources, employees and customers.
Decision Point and MobileTech make software that encrypts debit card pin numbers. In 2004, Decision Point was in talks to acquire Dallas-based MobileTech. Talks lasted nearly a year but later fell apart.
In 2005. Trimble Navigation ended up buying MobileTech.
According to Decision Point’s suit, a senior manager at the company involved in the deal talks approached MobileTech later by e- mail, telling the company that if it hired him, he could guarantee immediate profits.
Once hired, he allegedly raided Decision Point for workers and customers-bringing about seven employees and several key customers to MobileTech, according to the suit.
Decision Point had a who’s who list of customers, including Costco Wholesale Corp., Albertsons LLC and Japan’s Fujitsu Ltd.
The suit also alleges the manager stole several truckloads of property from Decision Point and had it shipped to Texas on MobileTech’s FedEx account.
Romeo is seeking damages in the “millions,” he said. He declined to say how much.
TTM in Santa Ana: 01 sales up 143% on acquisition
Copyright CBJ, L. P. May 14-May 20, 2007
(c) 2007 Orange County Business Journal. Provided by ProQuest Information and Learning. All rights Reserved.