Hi jmac, Intel Investors,
I think the real reason Intel, Rambus, Dell, IBM, etc. lost ground today, aside from the interest rate worries, is contained in the following article from "thestreet.com". If it is true, this will hit Intel smack in the server business, and thus in the ASP.
Of course, if the ASP goes, so do the gross margins.
It seems to me that with all the contacts the regulars on this thread have, we could collectively find out if this is true. The problem I see is, if it is true, you may have to talk against your position in order to tell this truth.
Can we do it ???
Best Trading,
X
Here's the article :
Hardware Investors Get the Y2K Willies
By Eric Moskowitz
Senior Writer
6/1/99 8:04 PM ET
PC stocks swooned Tuesday after Banc of America
Securities analyst Kurt King downgraded Hewlett-Packard
(HWP:NYSE) and Sun Microsystems (SUNW:Nasdaq) to
hold from buy. The move sent shudders through the sector,
pushing Sun down 6.3%, H-P down 4.4% and IBM
(IBM:NYSE) down 3.5%.
King's move was based on the companies' presumed
exposure to the Y2K problem. The problem is related to
computer systems' inability to reset their internal clocks to
2000 from 1999. Despite costly precautions, many observers
are still worried about the millennium bug's effects, and
pessimists warn that a string of downgrades in the sector
could panic investors, sending stocks plummeting.
Dennis Grabow, founder and CEO of Millenium
Investment, a Y2K-focused money management firm based
in Chicago, says the investment community has created a
"kiss-of-death" attitude toward execs foolish enough to even
breathe about Y2K. "I expect to see a lot more analyst
reports like the one we saw today," he says. "Companies
have just not been forthcoming talking about it." Grabow has
currently no positions in IBM, Sun or H-P.
Banc of America's King surveyed 50 large companies and
found that slightly more than half plan to cut fourth-quarter
information technology spending by between 10% and 80%.
Last month, Soundview chief strategist Arnie Berman
warned that the Y2K problem could lead a significant number
of companies to significantly reduce IT budgets during the
second half. "The attitude will be if it ain't broke, don't mess
with it," he says. Banc of America has done no recent Sun
or H-P underwriting.
Sun's experience after warning in April of a Y2K-related
growth slowdown may well be silencing other executives.
Those fears sent its stock sliding to around 50 from 70. On
Tuesday King said Unix-based systems were most at risk,
and that's why Sun and IBM, the two largest Unix vendors,
were badly hit: Sun closed down 3 11/16, or 6%, to 56. H-P
fell 4 3/16, or 5%, to 90 1/8 and IBM dropped 4, or 4%, to
112.
"Unix-based servers are often the guts of any organization
and those are the first things that are going to get locked
down during Y2K," says Kazim Isfahani, a Y2K industry
analyst at the Giga Information Group.
If more analysts hop on the bandwagon, then investors
should expect to see hardware stocks catch a summer chill
thanks to the Y2K bug.
Editor's Note: Palo Alto, Calif.-based H-P continues its
wooing of Wall Street Wednesday when its executive team
meets with analysts in New York to discuss its emerging
e-services Internet strategy.
Send feedback to letters@thestreet.com.
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