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Teradyne: A Tempting Tech Pick

Standard & Poor's says shares of the semiconductor equipment maker offer a compelling valuation and rates the stock a strong buy

We believe the shares of semiconductor test equipment maker Teradyne (TER; recent price, $11) offer a compelling valuation. Although we are concerned about near-term weakness in the global economy and the semiconductor equipment industry, we believe these factors are already reflected in the price of the stock. Over the next 12 months we expect Teradyne's total available market in automatic test equipment to increase in the middle- to high-single-digit range, outperforming the overall semiconductor equipment industry, which we project to decline approximately 10% to 15%.

Teradyne has gained market share in the system-on-a-chip (SOC) test equipment market the last two years, by our analysis, and we see this trend continuing in 2008, primarily driven by new product introductions, which the company expects to contribute $150 million to $200 million in revenues. We consider Teradyne the industry leader in its market, with 2007 total revenues representing 42% of the SOC market.