Tuesday, April 5, 2011

Chip Stocks: CEOs Versus Analysts

Computer chip stock were under pressure recently. The stocks of Intel, Advanced Micro Devices (AMD), Nvidia and other leading processor makers suffered under negative comments from analysts. The brokers were lowering their profit estimates for the chip companies, because they believe an allegedly weakening demand for PCs is slowing down the sales of computer chips.

But some CEOs seem to think differently, at least Richard Templeton. The CEO of Texas Instruments (TXN) wants to buy their competitor National Semiconductor (NSM). The Texan chipmaker offereds $25 cash for a National Semiconductor share, which is 78% higher than their closing price yesterday - a huge premium.

The offer is a sign that Texas Instruments regards the value of their competitor much higher than Wall Street and the analysts do. It is also a sign of great confidence in the prospects for the whole chip industry, much more confidence than most of the skeptical analysts show.

Whom should we believe more? A CEO of a company should at least know his market much better than the analysts. Maybe the offer for NSM is a valuable hint for investors?

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