Ahead of the Bell: Semiconductor stocks

The moves serve as new indicators that the economic crisis is hurting the tech industry, as demand slows for electronics and the chips that go in them--like the PC microprocessors made by Intel.

Late Wednesday, Intel cut more than $1 billion from its fourth-quarter revenue forecast and lowered its earnings expectations, citing lower chip demand. The company is the largest maker of PC microprocessors with control of 80 percent of the global market.

Meanwhile, National Semiconductor said it would cut 330 jobs and lowered its fiscal second-quarter sales outlook. The chip maker said it was hurt by a decline in wireless handset sales.

And Applied Materials said it will eliminate 1,800 jobs, or 12 percent of its workforce, by the end of fiscal 2009. This is the company's second announcement of job reductions this calendar year--in January it said it would cut 1,000 jobs.

Applied Materials, which also reported a 45 percent drop in fiscal fourth-quarter profit Wednesday, lowered its fiscal second-quarter revenue outlook, too. The company said that it will roll out more cost-reduction moves in fiscal 2009 because of declining market conditions.

JP Morgan analyst Christopher Danely, who rates Intel shares "Neutral" and National Semiconductor shares "Overweight," cut estimates for the companies in client notes and said he expects all chip companies he covers to lower their estimates "due to the sharp fall-off in demand driven by the global recession."

Regarding Intel, Danely said he is concerned there will be more cuts to its 2009 estimates because of a drop in demand. And he thinks a drop in order rates will lead to more revenue declines in National Semiconductor's February quarter.

RBC Capital Markets analyst Mahesh Sanganeria, who rates Applied Materials shares "Sector Perform," cut his price target to $9 from $16.