Strong PC Outlook over 4-5 Quarters Should Buoy Technology Stocks, Industry Guru Murphy
Predicts
Business Wire - October 21, 1997 19:47
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SAN DIEGO--(BUSINESS WIRE)--Oct. 21, 1997--Worldwide strength in the personal computer
sales and affiliated supplier businesses bode well for technology stocks over the next 4-5
quarters, a leading industry guru said today.
Michael Murphy, editor of the California Technology Stock Letter, said that despite Intel Corp's
(NASDAQ:INTC) recent cautionary pronouncements about revenue growth, "Everywhere else we
check we're finding the PC business is very strong and should remain strong for the next four
quarters as worldwide the conversion to Windows 95 and Windows NT continues."
Murphy, author of the soon-to-be-released book, "Every Investor's Guide to High Tech and
Mutual Funds," is the keynote speaker at the 1997 Informed Investors Electronics & Technology
Forum Sunday morning Nov. 2 in San Diego.
Companies scheduled to give analyst-style presentations to individual investors include
Credence Systems (NASDAQ:CMOS), In Focus Systems (NASDAQ:INFS), Trimble Navigation
(NASDAQ:TRMB), Learnout & Hauspie (NASDAQ:LHSPF) and Watkins-Johnson (NYSE:WJ).
Notice of participation is pending from several other companies. Up to eight companies may
present.
The Forum runs from 8 a.m. to noon at the Mission Valley DoubleTree Hotel. The cost is $15
pre-paid, $20 at the door which includes a continental breakfast served at 7:30. Investors unable to
attend may order tapes of the Forum for $25 for four company presentations and Murphy's
commentary. To register or order tapes, call Informed Investors Forum at 800/992-4683.
"Intel is very careful and always tells analysts what its customers are telling them," Murphy said.
"But what needs to be known is that Intel's customers are changing the model they use in
ordering. Many more are following Dell Computer (NASDAQ:DELL) and Compaq's (NYSE:CPQ)
lead and following a build-to-suit strategy."
Further, according to Murphy, many PC retailers are adopting a "just in time" distribution model
to tighten the retail channel such that retailers will re-order PCs as they are sold off the shelves.
This reduces the level of inventory exposure.
"Also, it gives the PC maker the opportunity to order the specific chips the retail customers want,"
Murphy said. "If Pentium II machines are popular, they'll order Pentium II chips, etc."
Murphy predicts Intel will announce "sometime in November" that its revenue projections will be
better than earlier thought. By then, he said, the inventory adjustments will have been absorbed
and the underlying strength of the overall PC market will prevail.
Murphy believes other chip makers, including Advanced Micro Devices (NYSE:AMD) and Cyrix
(NASDAQ:CYRX), "will ship all they can produce because PC makers want alternatives to Intel
chips." But production problems remain a hazard for the second-tier chipmakers, he cautioned.
Strong quarterly earnings reports from Microsoft (NASDAQ:MSFT) and IBM (NYSE:IBM) came
as no surprise to Murphy. "While the summer quarter always has cross currents and is the
weakest quarter of the year for techs, it's not surprising that Microsoft and IBM had good
earnings. And the fourth quarter will shape up to be strong."
Even companies that reported weaker-than-expected earnings, such as LSI Logic (NYSE:LSI),
should rebound in the fourth quarter, Murphy said.
Murphy doesn't believe the rumored Lucent Technologies (NYSE:LU) acquisition of Ascend
Communications (NASDAQ:ASND) will materialize. "Lucent can get most of what it wants by
partnering with Ascend," he said. "Also, why would Ascend want to sell out at this price when in
six months, with it getting its acquisition of Cascade under its belt and improving business, its
stock could be worth 50 percent more?"
Overall, Murphy said the strong PC market will lift related industries and suppliers including disk
drive makers, semiconductor manufacturers and semiconductor equipment manufacturers "from
Applied Materials (NASDAQ:AMAT) on down."
Among the companies Murphy anticipates will benefit from a strong PC climate are Seagate
(NYSE:SEG), Western Digital (NYSE:WDC), Cirrus Logic (NASDAQ:CRUS), IDT
(NASDAQ:IDTC), and Cypress Semiconductor (NYSE:CY).
"Mattson Technologies (NASDAQ:MTSN) is our favorite among he semi equipment makers,"
Murphy added.
Forum organizer Informed Investors of Sacramento has been providing investment education to
individual investors since 1993. For more information, call 800/992-4683.
CONTACT: Informed Investors Inc.
Bob Taylor/Tim Quast/Steve Chanecka,
916/448-8222 or 800/992-4683 |
