Investec Inc. Announces Investment Opinion: Investec Initiates Coverage of the Analog Semiconductor Sector

Business Wire, Sept 18, 2002

Business Editors

NOTE TO EDITORS: The following is an investment opinion issued

by Investec Inc.

NEW YORK--(BUSINESS WIRE)--Sept. 18, 2002

Initiating Coverage on Fairchild Semiconductor International,

Inc., Intersil Corporation, International Rectifier, National

Semiconductor Corporation and Micrel

Bobby Burleson, Semiconductor Analyst at Investec Inc., has initiated coverage of the analog semiconductor sector.

"We believe analog suppliers will continue to outperform the semiconductor industry. Historically, analog has outperformed the rest of the semiconductor universe. From 1996 to 2001, analog grew 6% compared to 0% for non-analog semiconductors. The trends driving analog growth remain intact. These trends include a greater emphasis on portability and connectivity, and increasing system complexity," Burleson said. "We also believe that the next semiconductor upturn will be driven by a broad base of end-markets and applications, dissimilar to the upturn of 2000, which was much more communications driven."

Within the context of this favorable, long-term backdrop for the analog semiconductor sector, Investec has identified key investment opportunities for the near term:

Fairchild Semiconductor International, Inc. (FCS -- STRONG BUY - $9.59). We rate Fairchild a STRONG BUY due to its combination of broad end-market exposure, gross margin leverage, and attractive valuation. Our 12-month price target is $20.00, or 1.5X our CY03 sales estimate. The company has a highly diversified customer and end-market base, allowing it to grow with what we believe will be a broad recovery for semiconductors in 2003.

Intersil Corporation (ISIL-- BUY - $14.87). We believe Intersil's strong, proprietary analog product set and attractive valuation support our BUY recommendation and a 12-month price target of $19.00. In our opinion, the company's analog business is stronger than it is currently given credit for, due to investor focus on the WLAN business; analog products are actually driving revenues.

International Rectifier (IRF -- BUY - $17.44). Our BUY recommendation for International Rectifier is driven by the company's proprietary product set, strong fundamentals, and attractive valuation. IRF has migrated its revenue base to higher margin, more defensible products offering system-level solutions. Our 12-month price target is $21.00, or 1.3X CY03 sales. -more- National Semiconductor Corporation (NSM -- REDUCE - $12.35). We are initiating coverage of National Semiconductor with a REDUCE rating as we believe its valuation does not offer substantial upside and NSM's non-analog businesses will hamper the company's growth. Our 12-month price target is $11.00. On an EV/Sales basis, NSM trades at a sizeable premium of 5.0X our CY03 estimates compared to the 3.5X average for its analog peers.

Micrel, Incorporated (MCRL - SELL- $6.77). We rate Micrel a SELL on concerns that communications infrastructure exposure may protract its revenue recovery, while a rich valuation may hamper stock price appreciation. With its P/E at 43X, we believe our 12-month price target of $5.00 reflects a more reasonable valuation of 30X.

Investec maintains its BUY rating on Analog Devices, Inc. (ADI-$21.68); however, we are adjusting our 12-month price target. We believe a price target of $27.00 or 26X CY03 EPS is reasonable given ADI's implied PEG of 1.2X, in line with the peer group average. Our previous price target was $38.00. We maintain our HOLD ratings on Linear Technology Corporation (LLTC - $20.57) and Maxim Integrated Products, Inc. (MXIM- $25.48).

Investec's Electronics Research Group employs a food chain approach to coverage of the electronics sector, which spans Semiconductor Capital Equipment, Electronic Design Automation Software, Semiconductor Devices, Electronics Manufacturing Services, Embedded Systems, and Consumer Electronics.

Investec Inc. makes a market in the shares of: ISIL, MCRL, LLTC and MXIM.

Editor's note: Interviews are available upon request.

About Investec Group

The Investec Group (JSE Securities Exchange: INT) is an international specialist-banking group which provides a wide range of specialized products and services to a select client base in 15 countries worldwide. The Group is organized in four principal businesses: investment banking, treasury and finance activities, private client activities and asset management.

Investec Group employs over 5,000 individuals worldwide. It is one of the Top 25 largest companies listed on the Johannesburg Stock Exchange and ranks among the world's top 350 banks with total assets under management exceeding $70 billion.

About Investec Inc.

Investec Inc. is the United States investment banking arm of Investec Group. The firm is a full service, research-oriented investment bank focusing on companies in the technology, healthcare, and consumer products industries.

Investec provides a full range of investment banking services, including public and private equity financings, private placements, mergers and acquisitions, and financial advisory services. Clients also benefit from its wealth management and asset management services.