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Chips On The Menu… Again

29 October 2015 by lberuti

The semi-conductor industry has been all over the news since the beginning of the week. After STM ( STMicorelectronics NV ) bidding for Fairchild on Tuesday, NXP ( NXP Semiconductors NV ) grabbed the headlines today, as they reported Q3 earnings. Although they announced revenue just below and EPS above the street consensus, people focused – as one would actually expect them to do - on the guidance for the coming quarters. The company surprised the market by lowering their forecast for fourth quarter revenues (which they expect to be down “low to upper teens range” quarter on quarter), as customers pulled back on orders amid a slowing global economy and higher inventories of unsold chips. The surprise did not come from the direction of the revision, but rather by its magnitude. The stock was first to react and was marked down almost 20%. The 5 year CDS was slower and only moved 12bps wider to 165bps. There is still time to reload shorts on a name that used to belong in the 200/250bps range.