The economic downturn is likely to hit chipmakers hard, according to projections from Stamford, Conn.-based market researcher Gartner Inc.
Worldwide chip revenue growth in 2009 is expected to be just 1%, down by about 7 percentage points from Gartner’s previous estimates, a report released last month showed.
Gartner analysts expect chip sales in 2009 to reach $282 billion, down from a prior forecast of $308 billion.
Local chipmakers mostly met expectations for the third quarter, but their outlooks for the current quarter and the early part of next year are looking less than rosy.
“Semiconductor growth was surprisingly strong until recently, but this will start to change in the fourth quarter,” said Bryan Lewis, research vice president at Gartner. “Evidence suggests that the semiconductor industry will see negative growth starting in the fourth quarter and that this will continue throughout most of 2009.”
Wall Street’s also pessimistic.
“We cannot think of a single chip firm that will see revenues fall less than 10% sequentially in the fourth quarter,” said Craig Berger, a chip analyst at Friedman, Billings, Ramsey Group Inc. in New York.
Berger tempered his statement when he said the one exception could be Irvine’s Microsemi Corp., which makes chips for military, aerospace and industrial customers.
He said the company is “unusually defensive” in this market because it has little exposure to consumers.
Emulex vs. QLogic
Costa Mesa’s Emulex Corp. slowly has been losing market share to rival QLogic Corp. of Aliso Viejo for sales of host bus adapters, a profitable bit of electronics that speed up the flow of data on a storage network.
In the third quarter, Emulex saw its share for host bus adapters fall to 37%, down from 42% a year earlier, according to data collected by Redwood City-based Dell’Oro Group Inc.
For the same period, QLogic saw its market share total 55%, up from 48%, Dell’Oro’s report shows.
Both companies long have dominated the market. Other small players include Milpitas-based LSI Corp., San Jose’s Brocade Communications Systems Inc. and others.
Emulex has been losing market share to QLogic for host bus adapters for a while now. QLogic reached 50% market share for the first time during the first quarter.
Emulex likely is selling fewer host bus adapters to companies that are hurting these days, such as banks, brokerages and financial services companies.
“There should be no surprise to anyone for the series of dramatic events in the financial services sector over the past several quarters has had an impact on spending,” Chief Executive Jim McCluney said in a conference call with analysts. “It appears that the distress in the credit and equity markets is spilling over into the broader economy, causing a drag on technology spending.”
Casino Niche
Irvine software startup Sendio Inc. has seen sales from a new set of customers,American Indian casinos.
“The gaming market is a fairly new one for us,” Chief Executive Kevin Bowyer said. “We got started about three months ago and very quickly signed up about 10 casinos. A lot of it has been word of mouth.”
It recently made a sale with Temecula’s Pechanga Resort & Casino, California’s biggest American Indian casino.
Sendio makes software that helps companies, schools and government agencies cut down on junk e-mail and messages with harmful viruses.
It’s different from other security software because it doesn’t rely on filters that glean bad e-mail from good based on content.
It instead relies on the e-mail sender to prove that he or she is legit.
“We authenticate emails, we don’t just filter spam,” Bowyer said. “If you were a spammer or sending out threats, you would never reply to authenticate that email.”
Filter technology only eliminates about 85% to 90% of all e-mail threats, according to Bowyer.
Casinos were quick to buy the software because “they are high-profile and often targeted with e-mail threats and spam,” he said. “Casinos can’t afford to have a system in there that’s only 90% correct because they get millions of e-mails.”
Sendio’s casino customers include Albuquerque, N.M.-based Isleta Casino & Resort and Black Oak Casino in Northern California.
The company sells servers loaded with its software to companies with 25 to 15,000 e-mail users. The software is sold in packs of 50 licenses on a subscription basis.
Sendio has raised about $6 million in a first round of venture funding and has some 25 workers here.
The company doesn’t disclose sales but said it has seen revenue triple in the past year.
New Engineer
Aliso Viejo’s Networks in Motion Inc., a maker of navigation software for cellular service providers, hired a head engineer.
NIM, as the company’s called, hired M. Fathi Hakam from San Diego’s Kyocera Wireless Corp.,part of Japan’s Kyocera Corp.,to be its vice president of engineering.
NIM’s software does what industry insiders call “location based services” for wireless phones. The software looks up maps, offers driving directions and searches for local businesses.
Customers include Verizon Wireless, part of New York-based Verizon Communications Inc., Sprint Nextel Corp., AT & T; Inc., U.S. Cellular Corp. and international wireless carriers.
Privately held NIM is set to see about $25 million in sales this year.
