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Merrill bullish on chip stocks

Merrill Lynch said on Friday it reinstated its coverage of Xilinx Inc. (Nasdaq: XLNX) with a buy rating, and put Altera Corp. (Nasdaq: ALTR) and Lattice Semiconductor Corp. (Nasdaq: LSCC) at "accumulate."

Merrill set 12-month price targets of $83 for Xilinx, $48 for Altera, and for $76 for Lattice. Xilinx shares were up 3 3/8 to 70 3/4, Altera rose 1 13/16 to 41 7/16, and Lattice gained 1 7/16 to 41 7/16 Friday morning.

Merrill sees Xilinx revenue of $935 million and EPS of $1.36 for 1999 and $1.23 billion and $1.76 for 2000, citing Xilinx's flawless execution on its newest high-density, high-performance family of field programmable gate arrays (FPGAs), named Virtex. Xilinx's "new products, including the 4000XLA and 9500XL families, are just beginning to ramp into production, giving the company very strong positioning in the early stages of a product cycle and semiconductor recovery,'' the company added in its report.

Xilinx reported better-than-expected earnings with a wave of recovering chips. Xilinx and Altera have risenin tandem before on upgrades

Merrill estimated Altera revenues of $820 million and EPS of $1.02 for 1999 and $1.03 billion and $1.37 for 2000. Altera's "product mix is shifting to newer products, with the FLEX 10KE family seeing an excellent adoption rate," according to Merrill's report.

Merrill sees Lattice's revenue at 370.0 million and EPS of $2.20 for 1999 and $495 million and $3.20 for 2000. Lattice's recent acquisition of Vantis from AMD solidifies Lattice as the 3rd largest Programmable Logic Device (PLD) supplier. Operating margins are predicted to approach the mid-20%-level by mid-2000- up from the high teens in the fourth quarter of 1999 - due to tight expense controls and other synergies.

Lattice recently announced a stock-split which has also buoyed shares over the last few days.