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Semiconductor stock ratings cut

A whole lot of shaking is going on in the chip sector as major brokerage firms took semiconductor stocks down a notch with lowered ratings.

    There was a whole lot of shaking going on in the chip sector today, as major brokerage firms took semiconductor stocks down a notch with lowered ratings.

    Thomas Kurlak, a chip analyst with Merrill Lynch, today reduced his earnings estimates on shares of various semiconductor companies, including LSI Logic (LSI), Texas Instruments (TXN), VLSI Technology (VLSI), and Altera (ALTR).

    Kurlak cited slower order rates, along with excess industry capacity, as translating to weaker prices. He said those weaker prices are offsetting unit growth.

    Other analysts followed suit. Morgan Stanley, for example, downgraded Altera to "neutral" from "outperform." Analyst Mark Edelstone said in a research report that Altera "experienced broad-based order push-outs, and revenues were significantly below expectations during the second half of November."

    Edelstone, who cited weakness in fundamentals, said that sluggish year-end demand and Altera's 20 percent exposure to Japan would lead to further earnings disappointments for estimate reductions.

    Volpe Brown Whelan also downgraded Altera, to "buy" from "strong buy," while ABN Amro Chicago downgraded the company to "hold" from "buy."

    Chip maker Altera saw its stock plummet 10-15/16, or 21 percent, over yesterday, ending the day at 40-3/4. VLSI dropped 14 percent, to end the day at 19-13/16; Texas Instruments lost over 10 percent, to end the day at 46-1/2; LSI Logic lost 8 percent, to end the day at 23-1/8; and Intel (INTC) dipped back 4 percent, to end the day at 78-1/16.

    Kurlak cut TI's 1998 earnings estimate range to between $2 and $2.50 per share, from $3.00 per share. He left his 1997 estimate unchanged at $2.04 per share. He also cut LSI Logic's 1998 estimate range, to between $1.10 and $1.20 per share from between $1.20 and $1.30 per share. He kept his 1997 estimate at $1.12 per share. Kurlak lowered VLSI's 1998 earnings estimate range, to between $1.40 and $1.50 per share from between $1.55 and $1.70 per share, but held his 1997 VLSI estimate steady at $1.29 per share. Finally, Kurlak reduced his 1997 estimate on shares of Altera to $1.51 per share, from $1.57 per share, and reduced his 1998 estimate to a range of between $1.60 and $1.75 per share from $2 per share.

    Reuters contributed to this report.