I'll share what I have with you, Kenneth.
I listened to a conference call after MEMC's announcement last week.
The fellow at JP Morgan was OBVIOUSLY dismayed, as he had issued a
report re-iterating his "Strong Buy" not 24 hours before the MEMC announcement.
WHat I say here is mostly IMHO, so please refer to the Caveat you
quoted in your message. 8-)
I get the impression MEMC has been hit with some unexpected order cancellations from their Japanese and/or Korean customer(s). As dirt
cheap as RAM has become, I would also guess that nobody can make money
running a 150mm Wafer fab. The 200mm wafer, which supplies about 80% more chips is the only viable economic production method. (As a real life example, I bought 16mb of Ram about 30 months ago for $560.00 .
Thursday 9/12/96, I bought 16mb of EDO RAM for $99.00)
MEMC has been working towards 200MM & 300MM production since BEFORE the IPO. IT is not like they just found out they are making the wrong stuff, like Micron did a year ago. The shift has just been exacerbated
by market conditions.. faster than MEMC can make the transposition.
MEMC refused to use their own money to expand beyond what they thought was prudent. Despite their best efforts to watch them, I believe MEMC's customers did some double ordering during the shortage, and are
now working off excess inventory.
When WFR came public I was told by a few folks who worked at WFR that
it was a cyclical business. Roger McDaniel echo'd that in his IBD interview. NOW, I can feel it. I had some stock put to me last week
at $45. 8-( I congratulate Larry, Mohan, and the others whose analysis saw the trouble in the stock WAY before it happened.
Overall, I'd say we have hit a dramatic inventory adjustment. WFR is
still one of a handful of producers, silicon is still used & needed
by darned near everyone. Just as there were periods of "cheap gas" after the 1974 energy crisis, we are in a period of "cheap silicon".
I think WFR will turn out as well as the oil stocks did, given time.
I hope to buy some more WFR while it is in the low 20's. I do NOT think it will bounce back next week or month, but I DO believe the
basic fundamentals that made me like WFR at $27.00 when it was an IPO
are Still valid. I've watched INTEL, Microsoft, etc etc etc all hit
the skids. But, just like WFR, they are the standard that others are
measured by, and like any true champion, they have bounced back countless times.
Regards,
Doug |
