Microprocessors are the new cigarettes
JP Morgan urges chip CEOs to inhale
On a more positive note, Peruri theorized that a weakened dollar could aid PC sales. "As the Fed weakens the dollar, that is making Intel CPUs and Dell and Acer computers effectively cheaper around the world. It is possible that the combination of Intel and AMD competition, CPU price points coming down and the dollar being depreciated could cause demand to accelerate for PCs."
In addition, Mark Lipacis, a managing director at Morgan Stanley, sees room for optimism around the state of the telecommunications market. The big telcos have less debt than in years past and are facing a lot of competition from the cable companies. In addition, it looks like their networks will be flooded by serious bandwidth over the next couple of years due to rising video and audio traffic. "We say that YouTube is the new Solitaire," Lipacis said.
"These guys can spend money if they are motivated, and the cable companies are the motivation," he added.
So, that's good news for chip makers who get their silicon into things like routers and switches, according to Lipacis.
Putting their mouths where their speculation is, the money men agreed to pick a few stocks for the Churchill crowd.
Danely urged the audience to consider Microchip Technology (MCHP) because it's "competing against stiffs" like Freescale and STMicroelectronics.
His next pick - AMD - was a bit harder to justify.
"From a stock perspective, they are trading like they are going out of business," Danely said, as the crowd erupted in laughter. But Danely is confident that Intel will face growing product delays and that AMD will reach profitability by the end of the year.
Lipacis latched onto PMC-Sierra (PMCS), saying that the company should benefit if his telecommunications spending thesis is right. "It is a classic momentum name," he added, emphasizing the exacting standards that Wall Street analysts try and reach. (And the momentum is inspiring.)
Lipacis also backed Texas Instruments (TXN) on the premise that "people hate that stock" and going against the grain is sometimes a good thing.
Dan Niles, the CEO of Neuberger Berman Technology Management (part of Lehman Brothers), tried to sell the audience on Skyworks Solutions (SWKS), which has gotten rid of some under-performing businesses. And he cheered Applied Materials (AMAT) because the company is reworking semiconductor manufacturing machines to make cheaper solar cells. You may not be able to pick the solar cell maker that will last through the boom and inevitable bust in alternative energy, but you can profit from the company selling all of the vendors the tools to make their gear, goes the thinking.
Peruri, who in our experience is one of the best informed money men out there, opted to back Marvell (MRVL) because it has a history of innovation and seems poised to get on the right track. And he pointed to ON Semiconductor (ONNN).
Of course, you could forget these boring chip makers altogether and go find yourself a nice cigarette company to back. ®