Chip Equipment Stocks Fall on Intel Fears

By Timna Tanners

LOS ANGELES (Reuters) - Shares of semiconductor equipment makers fell on Monday on what market observers said were concerns that No. 1 chipmaker Intel (NasdaqNM:INTC - news) might not spend the full $7.5 billion it has allotted for capital spending in 2001.

Although Intel said its forecast has not changed, analyst research reports and speculation in the stock market suggested that the company's spending goals were optimistic, given the economy's weakness.

That sent shares of many semiconductor equipment makers, who depend on orders from Intel, lower on the Nasdaq market, although shares recovered from earlier losses at the close.

"I think they are under some pressure because of talk that Intel could be scaling back capital expenditure spending from $7.5 billion to something less than that," said SG Cowen analyst Tia-Min Tang.

Applied Materials Inc.'s (NasdaqNM:AMAT - news) stock fell 1/8 to $47-13/16 on Nasdaq, after falling to as low as $45-3/16. Rival KLA-Tencor Corp. (NasdaqNM:KLAC - news) fell about 2.5 percent, or $1-1/16, to $42-5/16. LAM Research Corp. (NasdaqNM:LRCX - news) also fell about 2.5 percent, or 5/8, to $24.

Also down were Applied Micro Circuits Corp. (NasdaqNM:AMCC - news), ending off $2, or 5.4 percent, at $35-1/16, and Novellus Systems Inc. (NasdaqNM:NVLS - news), down 3.9 percent, or $1-3/4, at $43-5/8.

The Standard & Poor's semiconductor equipment index (^SPTKSM - news) lost 0.9 percent, or 3.8 points, to 408.39, compared with a 12-month low of 299.31 and a high of 1,021.72.

Intel declined to comment on the market talk of spending cutbacks.

"Our capital expenditure forecast for 2001 is $7.5 billion," Intel spokesman Chuck Mulloy told Reuters, referring to the company's forecast on Jan. 16.

Last week Intel said it cut discretionary spending, such as overtime, travel and consultant work, but said its capital expenditure budget was unchanged.

Shares of Intel were down 1.5 percent, or 7/16, at $29-1/2.

Tang said Intel was under pressure to spend its full allotted capital expenditure budget to lower manufacturing costs for each of its chips. His estimate for Intel's capital expenditure spending was between $6 billion and $6.5 billion.

Given Intel's weakness and his expectation that the semiconductor equipment manufacturing industry hit bottom in the third quarter, Tang said in a report that stocks in the sector should see little near-term strength.