Recently I was asked to suggest the names of just a couple of good analysts for the analog semiconductor industry; you know, the guys who tell the world how companies are going to perform so that the big Wall Street investors know what's happening and can make smart decisions for themselves and their clients.

It was as well that this request came by e-mail so that it could not be seen by the requestor that he had pushed a major 'hot' button in me. I had to reply that I was unable to name an analyst who might be suitable.

What Does the Analyst Do?

The good analyst specializes in a really narrow area of business -- and certainly our analog business would fit that definition -- and keeps a close eye on all the trends within that market segment. He (and I'm going to use he for simplicity) knows what the manufacturers in his group are doing, what their market focuses are, what their financials are probably going to look like, etc. This is done in much the same way that the editor goes about his business; we need to be more inside companies than outside; we need to listen to their stories and believe what should be believed; we need to keep business secrets; we need to know the people and personalities.

In return, companies will take the analyst even further into their confidence and will respond to very direct questions in a manner that a good diplomat would be proud of. Surprises in such a chain -- and network -- will often happen after a company declares dividends, or their lack, that are a surprise to investors. Then, of course, the legal stuff starts flying around.

It has taken the analog semiconductor manufacturers a long time to get analysts to understand that analog and digital are different: that something happening at Intel isn't necessarily going to affect the business or valuation of a Maxim or an Analog Devices. They seem to believe that now, but sometimes they act as if they still don't know it; that, or the market hears what they are saying, still doesn't believe it and acts without the analysts' inputs.

Be that as it may (and it is a big may if your company gets dinged because there is a fall in the price of DRAM) there is an even larger discrepancy in that there seems to be no way the analysts are able to differentiate between the analog companies themselves.

Misery in My Morning Newspaper

The morning of April 8 and the business section of my local newspaper carries a report from Bloomberg News. The headline is, "Motorola drops, future dim," with the subhead, "The firm says the Asian crisis will make phone and semiconductor prices fall further, and other companies might not escape."

I don't believe for one minute that Motorola said that, " . . . other companies might not escape" and I would presume that was a desk editor's idea of a more compelling lead. The piece itself goes into the unexpected numbers for the first-quarter profits attributed to the Asian crisis. "The bad news rippled through the semiconductor and telecommunications industries, both of which are vulnerable to weakness in Asian sales."

Semiconductors would also be vulnerable to an earthquake in Santa Clara, a major traffic accident on US-101, a strike on Caltrain, you name it. What logical reason is there to dun a complete industry because of one company's report? Even dunning just the sector doesn't make any sense; not every company is doing similar business. Indeed, two days after this, TI announced record profits from Japan. But hitting Motorola by 10.6% on its stock price the 'wonderboys' also hit TI 3.8%, Analog 3.6%, Maxim 4.2%, National 5.3%, and Linear 5.9%. I have no idea what Linear did to deserve harsher treatment than the others, but then I don't really see any sense in the whole process anyway.

But Bloomberg took it a stage further, "That may mean more trouble for chipmakers including Intel Corp., National Semiconductor Corp. and others." There we go, put all the semiconductor manufacturers in the same basket, again. And, perhaps, unwilling to be seen ignoring their own thoughts, the market hit Intel by a token 1.7% anyway; though they already did worse to them when Intel announced lower than expected profits were coming this quarter.

And why, when the fall in the analog companies is supposed to be due to telecommunications business in Asia, are companies like Lucent, Nokia and Ericsson not hit at the same time. And the biggest RF/PA supplier, Anadigics, is hit just over 1%, while TriQuint remained solid until it later revealed Beaverton/Hillsboro relocation production problems?

How Do We Educate the Market?

Executives at all the major analog semiconductor really do try to get to the analysts to make them understand the differences between them and the Intels and mini-Intels. But it seems like the technical definitions are rather beyond them, or they don't listen, or the people they talk to don't want to hear.

My valuation of analog companies differs so radically from the analysts it is just well I don't have any technology stocks in my own name: I would lose a bundle. When I go into a company I see the design engineers, the marketing people, the premises, the attitudes, even the nature of the people in the cafeteria. There is no magic formula for a company's success but in the best there seems to be some kind of fun atmosphere with winners in the design team who listen to real inputs from real marketing teams. The market leaders -- in the stock market version of the semiconductor derby -- seem to be places I wouldn't want to work for long, and in one I might even 'go postal.'

By: Paul McGoldrick
Sr. Technology Editor, EDTN

Analog Main | Product of the Week | Columns | Editorial | Tech Notes

		Click here to get your listing up.