Atheros downgraded to hold at Collins Stewart; other chip stock ratings also cut

SAN FRANCISCO, Apr 29, 2008 (Thomson Financial via COMTEX) -- COLLF | news | PowerRating | PR Charts -- Atheros Communications Inc. was downgraded to hold from buy at Collins Stewart Monday on concerns about the broader consumer environment.

In a note to clients analyst Ramesh Misra said the Santa Clara, Calif.-based provider of semiconductor products for the wireless communications market, despite being one of "the most consistent performers" among semiconductor stocks overall, "will be unable to escape macro concerns impacting the U.S. consumer."

Misra said the 25% revenue growth he has modeled for the company in 2008 could be at risk.

He sees 2008 revenue of $522.1 million and 2009 revenue of $617.9 million.

The company is scheduled to report first-quarter results after the closing bell Monday. The mean estimate of analysts polled by Thomson Reuters was a per-share profit of 28 cents on revenue of $113.9 million.

Likely positive factors such as the company's recent acquisition of U-Nav and anticipated design wins for Atheros's second generation ROCm part could be offset by weakness in its core wireless LAN business, he said.

The stock fell 3.1% to $26.41, pulling back from a 2-month high of $27.52 hit in intraday trading on Friday.

In a separate note Monday Misra said other consumer-focused semiconductor stocks may be impacted by recent caution among customers, especially in relation to longer-term contracts.

"While valuations on most names are quite reasonable in our view, which should limit the downside on most stocks, we are reluctant to buy most semiconductor stocks ahead of a second half rebound that may never come or be much weaker than normal," he wrote.

Companies with large international exposure may experience less impact from softness in the U.S., but because the U.S. is also the biggest global market for electronic devices, domestic consumer sentiment will have a "far-reaching impact on the semiconductor industry this year," he said.

Misra also downgraded California Micro Devices Corp., Supertex Inc., Tower Semiconductor Ltd., SiRF Technology Holdings Inc. and Hi/Fn Inc. to hold from buy.

He maintained buy ratings for Aehr Test Systems, Amtech Systems Inc., Emcore Corp., Volterra Semiconductor Corp., Comtech Group Inc., Diodes Inc. and On Semiconductor Corp.

Aehr shares were trading up around 4.6% at $8.59. On Semiconductor stock rallied around 5.4% to $7.48. Brigid Gaffikin bg/tk1

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