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Chipmaker roundup: Dallas meets estimates in 2Q

Dallas Semiconductor Inc. (NYSE: DS) met analyst estimates in the second quarter.

In results released after market close Thursday, the Dallas-based maker of integrated circuits and semiconductor-based systems posted net income of $16 million, or 52 cents a share, on target with First Call's survey of nine analysts.

Second quarter revenue rose to $94 million, up 8 percent year-over-year and up 6 percent sequentially. Dallas earned $15.2 million, or 50 cents a share, on sales of $88.6 million in the first quarter of this year. The company posted a profit of $14 million, or 47 cents a share, on revenue of $87 million in the second quarter of 1998.

Dallas, whose chips are used in a wide range of electronics, saw growth in several product lines, said Vin Prothro, chairman and CEO.

The company is increasing its use of subcontractors in the Philippines to cut costs, Prothro said. By year's end, the company expects to see lower expenses as much as one quarter of Dallas' final test and and module assembly operations will be done in the Philippines. To ensure timely delivery, Dallas will increase its inventory for some products, Prothro said.

Some new products have seen "predictably low" production yields, Prothro said. "We expect gross margins to benefit as yields and sales of our new products begin to ramp," he said. "At the same time we are working to minimize manufacturing costs, we are increasing investments in new product development and sales and marketing infrastructure to capitalize on what we believe are attractive long-term market opportunities, including broadband communications, 1-Wire chips, iButtons, Battery Management, temperature-compensated crystal oscillators and more."

Shares of Dallas slipped 1/16 to 55 3/8 in Thursday's regular trading, prior to the earnings report. Of seven analysts surveyed by Zack's Investment Research, three recommend Dallas as a "strong buy", three have the stock as a "moderate buy", and one maintains the equivalent of a "hold" rating.

Other semiconductor companies reporting quarterly results:

  • S3 Inc.
  • (Nasdaq: SIII) The maker of graphics chipsets had an even better third quarter than it expected.

    Not only did third quarter revenue rise 30.7 percent sequentially to $57.3 million, but the company also posted a surprise profit of $1.1 million, or 2 cents a share. Earlier this month, S3 said it expected to report break-even results or a slight loss. One analyst had predicted a loss of 2 cents a share, according to First Call.

    "In the desktop market, we have experienced widespread adoption of Savage4 and are ramping volumes," said Ken Potashner, president and CEO of S3. "In the notebook market, we are encouraged by customer response to our mobile Savage products."

  • PMC-Sierra Inc.
  • (Nasdaq: PMCS) Increased deployment of high-speed Internet access helped boost PMC-Sierra's bottom line easily past analyst forecasts in the second quarter.

    The chipmaker posted net income of $16.1 million, or 22 cents a share, excluding gains from investments and charges related to acquired in-process R&D. First Call's survey of 18 analysts had predicted a per-share profit of 19 cents.

    Revenue from networking chips, which generated almost 92 percent of PMC-Sierra's second quarter business, grew 16 percent sequentially. Overall revenue increased to $59.3 million, a 48 percent year-over-year.

    "PMC-Sierra's networking semiconductor revenue growth has been accelerating due to the aggressive deployment of broadband infrastructure by communications service providers," said Bob Bailey, CEO and president. "The Internet traffic tidal wave is taxing the world's information infrastructure and PMC-Sierra is benefiting from this trend."

  • C-Cube Microsystems Inc.
  • (Nasdaq: CUBE) Sales of DVD-related products and digital headends helped C-Cube earn a penny per share more than Wall Street anticipated.

    The maker of chips for digital video systems posted net income of $11.7 million, or 28 cents a share, a penny better than predicted of First Call's survey of eight analysts.

    Revenue increased 14 percent year-over-year, to $94.1 million from $82.5 million in the year-ago period, when C-Cube earned 25 cents a share, not including one-time events.

    Although C-Cube saw its historical pattern of lower Asian sales of chips for CD video, higher sales of DVD encoders in Korea and Japan helped offset that. C-Cube also saw strong U.S. sales of encoder chips for head-ends used in digital cable and satellite systems.>