Sector Snap: Semiconductors waver as ON soars on 2Q outlook

The chip sector, as measured by the Philadelphia Semiconductor Index, rose 1.29 point or 0.3 percent to 404.38 in midday trading before falling 0.78 points or 0.2 percent to 402.17.

ON shares soared $1.50, or 19.2 percent, to $9.30 in midday trading after it said it expects second-quarter sales of $545 million to $560 million. Its estimate is way ahead of Wall Street's forecast -analysts polled by Thomson Financial expect sales of just $400.5 million.

ON also comfortably beat analysts' profit expectations for the first quarter.

Robert W. Baird & Co. analyst Tristan Gerra said the Phoenix-based company showed strong execution given the weak economy.

The first-quarter results and second-quarter outlook were particularly favorable in light of recently reported results from ON competitors, Gerra said.

The company's first-quarter acquisition of competitor AMIS Holdings Inc. will provide cost efficiencies, he added.

Network equipment maker Cisco Systems' third-quarter results brought encouraging news for its Mountain View, Calif.-based chip supplier Cavium Networks Inc., according to Oppenheimer & Co. analyst Allan Mishan.

Mishan noted that Cisco's U.S. demand remains sluggish, but its management did not report a slowdown elsewhere. Cavium has stronger Cisco revenue than other chip makers such as IDT and NetLogic, he said.

Cavium shares rose 32 cents to $20.33 in midday trading.

Deutsche Bank analyst Brian Modoff maintained his "Hold" rating on Greensboro, N.C.-based RFMicro Devices Inc. after the company announced it would exit the receiver chip business.

"While this could help margins, it also cuts growth," Modoff warned.

RF Micro Devices shares fell 7 cents, or 2 percent, to $3.38 in midday trading. They have traded in the past year between $2.52 and $7.46.