11 November 2008
Specialty Semiconductors
Sun, surf, sand in Socal
Arnab Chanda
Research Analyst
(+1) 213 620-8250
arnab.chanda@db.com
Steve Zhang
Research Associate
(+1) 213 620-8346
steve.zhang@db.com
Reiterate cautious view on Specialty IC sector
We continue to believe that caution is warranted due to strong potential of a
prolonged worldwide recession. At the current moment, we expect C09 IC
revenues to decline 10%+, with the potential for downside adjustments, with the
earliest potential for improvement in 2H:C09. At the current time, we would retain
our cautious stance and stay on the sidelines on the sector.
Deutsche Bank Securities Inc.
All prices are those current at the end of the previous trading session unless otherwise indicated. Prices are sourced from local
exchanges via Reuters, Bloomberg and other vendors. Data is sourced from Deutsche Bank and subject companies. Deutsche
Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm
may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision. Independent, third-party research (IR) on certain companies covered by DBSI's research
is available to customers of DBSI in the United States at no cost. Customers can access IR at http://gm.db.com or by calling 1-877-
208-6300. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1.
Industry Update
Top picks
Silicon Laboratories (SLAB.OQ),USD22.81 Buy
Tessera Technologies (TSRA.OQ),USD17.63 Buy
Companies featured
Altera (ALTR.OQ),USD15.26 Hold
Cavium Networks (CAVM.OQ),USD11.76 Hold
Ikanos Communications (IKAN.OQ),USD1.30 Hold
LSI Corporation (LSI.N),USD3.52 Hold
Marvell Technology (MRVL.OQ),USD6.17 Hold
NetLogic Microsystems (NETL.OQ),USD19.03 Hold
NVIDIA (NVDA.OQ),USD8.16 Hold
Silicon Laboratories (SLAB.OQ),USD22.81 Buy
Tessera Technologies (TSRA.OQ),USD17.63 Buy
Xilinx (XLNX.OQ),USD16.50 Hold
Zoran Corporation (ZRAN.OQ),USD7.08 Hold
Global Markets Research Company
October Monthly Review
We are reviewing the performance of specialty semiconductor stocks in October
as well as any news that arose during the month. Our focus this month is on the
Q3 results review of our companies as well as related lateral companies.
Specialty IC Performance declined
The Communication IC Index and the Digital Media index outperformed the SOX in
October. The fall in consumer spending, a negative sentiment and the deepening
credit crisis continued to negatively impact the markets. Technology stocks had its
worst month since December 2002, with the SOX falling by 16% in October.
Valuation/Risk/Reward
We largely value the sector on a P/E basis, for unprofitable companies we use
EV/Sales or Price/Sales. We use GAAP EPS estimates for PLD companies and non-
GAAP elsewhere (higher growth rates/options expenses). Risks for the specialty IC
sector can be divided into two categories: a) end-demand, b) inventories. If the
global macroeconomic environment is weak, or in the absence of compelling new
products, growth rates of PCs, handsets, networking, telecommunications,
industrial, and consumer devices are likely to be lower than in a more robust
environment. Lower end-demand will affect specialty IC growth rates. In addition,
if system manufacturers, contract manufacturers, and distributors take longer to
clear inventories than expected, or hold lower inventories, we believe that
specialty IC growth rates will also be adversely affected.

October 2008 Monthly
Market Commentary
October was a very weak month for semiconductor stocks as well as the broader market as
fears of a prolonged recession and continued fallout from the Lehman Brothers bankruptcy
rattled the broader markets. Technology stocks declined along with other sectors with the
SOX falling 16% in October.
􀂄 The best performing stocks in October were Tessera (up 18%), Zoran (up 15%), Nvidia
(down 3%), Altera (down 8%) and Cavium (down 8%).
􀂄 The worst performing stocks in October were LSI (down 24%), NetLogic (down 23%),
Marvell (down 18%), Ikanos and XIlinx (both down 16%).
􀂄 For the month, the Nasdaq was down 12%, the Dow was down 10% and the SOX was
down 16%.
􀂄 Year-to-date best performers are Altera (down 10%), Xilinx (down 16%) and LSI (down
27%).
􀂄 Year-to-date worst performers are NVIDIA (down 74%), Ikanos (down 72%), Zoran
(down 64%) and Tessera (down 58%).
􀂄 For the year, the Nasdaq is down 35% while the Dow is down 30% and the SOX is
down 41%. Both the Communications IC Index and the Digital Media Index
outperformed the SOX in October.