Excessive Inventories, Poor Demand Take Toll On Chip Makers

By BridgeNews A glut of semiconductors and a slowing economy prompted three more chip makers -- Vitesse Semiconductor Corp., LSI Logic Corp., and Cypress Semiconductor Corp. -- to lower their earnings forecasts for their current quarters. The warnings came as the Semiconductor Industry Assn. said that in January global sales of semiconductors fell 5.7% from December. The SIA says sales fell because of excessive inventories and poor demand for goods using the chips. LSI Logic, which makes high-performance integrated circuits and storage systems, now expects to earn 3 cents a share for the first quarter. That's well below analysts' expectations and the company's own previous expectations of 21 cents per share. The Milpitas, Calif.-based semiconductor maker reports that revenues will decline 30% in the fourth quarter, much more than the 12% drop it had predicted. Vitesse, based in Camarillo, Calif., says it now expects to earn between 21 cents and 22 cents per share in its fiscal second quarter. The company had predicted earnings of 26 cents to 27 cents per share. Cypress Semiconductor Corp., based in San Jose, Calif., reports that it will earn 30 to 34 cents per share in the first quarter, much less than the 56 cents analysts had expected. It blamed poor demand and changes to its business model for the shortfall.

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