11.13.2001
Guidance points to gloomy outlook

• Macronix looks likely to offer conservative guidance for 4Q01 and 2002 at its analyst meeting later today. Our sources suggest Nov. revenue will reflect the 2H01 peak with flattish MoM growth from Oct. Dec. will likely experience a 10-15% sequential decline, driven by a drop in shipment volume across all product lines and pricing discounts for Nintendo, a top customer. 2002 will be another difficult year. Although shipment volumes on ROM and flash are expected to increase, pricing erosion on both is inevitable. We expect the company to work off inventory (we estimate NT$10bn by end-2001) during the first 3 quarters, resulting in a lower utilization rate, while pretax income marginally breaks even in the period. We maintain our current recommendation at this juncture.