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Chip, net stocks are tech standouts
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December 27, 2001: 4:29 p.m. ET
Merrill boosts AMD, chips; e-commerce shares continue to rise.
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NEW YORK (CNN/Money) - Semiconductor and Internet stocks took the spotlight Thursday as the tech sector moved higher for a second day in a row following the Christmas holiday break.
Volume was light, with roughly 1.1 billion shares changing hands on the tech-heavy Nasdaq composite index, which ended the session 13.7 points higher at 1974.4.
Shares of Advanced Micro Devices (AMD: up $0.50 to $16.12, Research, Estimates), the No. 2 supplier of PC microprocessors, were among the most active on the New York Stock Exchange, rising more than 4 percent on the heels of upbeat comments from a Wall Street brokerage.
Merrill Lynch on Thursday raised its financial expectations for AMD in the fourth quarter, saying it now anticipates the company to report a loss of 15 cents per share, compared with its previous estimate for a loss of 23 cents per share.
The firm also said it expects to see a 17 percent rise in AMD's fourth-quarter revenue from the $765.9 million it logged in the third quarter.
Merrill's new estimate for AMD is more optimistic than the consensus estimate of analysts polled by First Call. At last count, the general expectation was for a loss of 19 cents per share.
While it ranks second in the market for PC microprocessors, AMD runs a distant second to Intel (INTC: up $0.38 to $32.67, Research, Estimates), garnering roughly 20 percent of the global market share.
The company has been trounced this year in a brutal pricing war with Intel as it continued to try to win market share, pitting its Athlon line of processors against Intel's Pentium 4. Intel has stepped up production of its Pentium 4 chips and has been aggressively cutting prices, in some cases by as much as 80 percent.
In a note to clients Thursday, Merrill analyst Joe Osha said tight supply of Intel's Pentium 4 appears to have enabled AMD to sell more of its higher-priced Athlon products, which accounts for the more optimistic financial estimates.
Still, Osha warned that Intel's plans to begin shipping a new version of the Pentium 4, code-named Northwood and built using a more advanced manufacturing process, poses a substantial challenge to AMD in the first quarter, and he reiterated a "neutral" rating on the company's shares.
"For now, we're staying with the neutral intermediate-term rating on AMD's stock until we see how the company weathers the Northwood launch," Osha said. "We are still long-term strong buyers of the stock -- even if AMD suffers at the hands of Northwood it will not plunge as deeply into loss as it has during past Intel offensives."
Earlier this month, both AMD and Intel said fourth-quarter sales would be a bit better than they recently had expected.
Elsewhere among semiconductor stocks Thursday, shares of computer memory chip maker Micron Technology (MU: up $0.77 to $31.17, Research, Estimates) added to its recent gains. That stock got a lift Wednesday after it said it expects to enter into a strategic alliance with Hynix Semiconductor, a rival memory chipmaker based in South Korea. Proposed terms of the deal were not disclosed, but analysts speculated it might involve Micron taking over management control at Hynix or acquiring some of its assets, such as its manufacturing plant in Eugene, Ore. Whatever the deal is, it is likely to further shift the dynamics in the memory-chip industry.
Earlier this month, Micron, which is based in Boise, Idaho, agreed to purchase a U.S. manufacturing plant from Japan's Toshiba, which has decided to exit the computer memory-chip business, which over the past year has been hard hit by a sharp decline in prices. Observers have pointed out that such consolidation in the industry would enable Micron to reduce the output of chips into the marketplace and ease some of that pricing pressure.
Other chip stocks moving higher Thursday included: Texas Instruments (TXN: up $0.70 to $28.75, Research, Estimates); National Semiconductor (NSM: up $0.93 to $31.28, Research, Estimates); Altera (ALTR: up $0.03 to $21.22, Research, Estimates); LSI Logic (LSI: up $0.22 to $15.73, Research, Estimates); and Xilinx (XLNX: up $1.16 to $39.57, Research, Estimates).
The Philadelphia Stock Exchange's semiconductor index rose 9.93 points to 530.61, a 1.9 percent gain on the day.
The stocks of Internet commerce providers were also in focus Thursday following some more optimistic comments about the pace of holiday sales.
The Dow Jones Internet commerce index rose .59 points, or 1.1 percent, to 53.01.
Amazon.com (AMZN: down $0.50 to $10.60, Research, Estimates), the nation's No. 1 online retailer, was in focus after it said it had taken over 37.9 million orders as of Dec. 21. Its shares had maintained their momentum earlier in the session but finished in the minus column.
Amazon's stock rose sharply Wednesday following an upbeat report from US Bancorp Piper Jaffray, which reiterated its "outperform" rating and said it expects strong unit sales to more than offset the lower overall average prices and help Amazon with top-line growth.
Other industry observers chimed in as well Wednesday, pointing out substantial increases in traffic to e-commerce sites in November, which helped boost stocks such as eBay (EBAY: down $0.17 to $66.17, Research, Estimates) and 1-800-FLOWERS (FLWS: up $0.31 to $15.70, Research, Estimates) as well as online travel services providers Expedia (EXPE: up $0.36 to $39.91, Research, Estimates) and Priceline (PCLN: up $0.34 to $5.77, Research, Estimates).
Shares of TMP Worldwide (TMPW: up $1.85 to $43.73, Research, Estimates), which operates Monster.com, the leading job-recruitment site, rose after it said it will not raise its takeover bid for HotJobs.com (HOTJ: down $0.30 to $10.37, Research, Estimates). The offer has declined in value substantially since TMP first floated it last June.
HotJobs said it has accepted an offer from Yahoo! (YHOO: up $0.26 to $17.77, Research, Estimates), which earlier this month offered roughly $436 million for HotJobs, outbidding TMP, whose stock-swap offer was valued at nearly $500 million when it first made it but has since fallen to about $340 million.
Yahoo! said it would pay $10.50 in cash and stock for all of HotJobs' outstanding shares, giving its offer a firm value of about $436 million. 
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