Susan thanks for the thanks.. now after Oil prices these guys have new fixation on Dram prices that now the new hit will come from falling dram prices..look at the Dram prices associated chart and some of these guys were openly shorting semis, from -9% the prices spiked to new highs in 99 and now are consolidating. These very same guys spent gallons of gallons cyber specks suggestive of a huge drop in semis, little did they realize that prices are rising and have appreciated from 96 nearly 87%.... their minds are set in concrete and look at AMZN they were looking at this model as a failed model but heck it worked, Border books if I am right has 200 stores and capital of 500 million $'s the market has given it a cap of 1 billion $, now AMZN with 50 m$ capital and no cement and mortar activity is being given a cap of 21 bn $, the reason being that Ike sitting in London gets all his books on cyber space and so far penetration is only 8% in Europe and lesser in ASEA, according to some internet on scale of discovery has importance second to a 'wheel' a slight exaggeration for some but shows to you that we are in a new age, the old models are not going to work and Warren Buffet after his tremendous fall from grace will soon understand technology like he did Cole better than us or Solomon Brothers, these hardened approaches make no money. It is all about market momentum and playing it on the side of the market is the name of the game for every day traders like us, we cannot afford to 'intellectualize' to much, we need action every day levels for entry, avoidance 'of our hard earned money from these shorts' to be whipsawed, for that going to the bottom of news, getting out of 'insular instincts' and knowing that some world exist outside across Atlantic is important... these part timers shorts need to understand that wave of the new paradigm has just not begin, it will be great but same guys use to talk of CSCO at 12$ or Yhoo at 15$ as most speculative stocks, they still trivialize human endurance, someone who has not been able to understand the impact of a product writes about the core design and that is something markets hates about them, these bunch are kicked in their faces and every time since they have common strategies, they look at the other side and show as ig nothing has happened, why don't they post from what they have been saying in a re-cap over last few days... that stinks they just want to move on like that Alien force in the 'Independence day', spread rumors nonsense and it has never to right within the market parameters... for any investor I would remind daily trading is about open minds and never impose your half baked skills on cooked products, that will kick on your face like DOW NDX closing near 3 points of all time old high proved last night...
smartmoney.com
DRAM Prices and Chicken Little
By Monica Rivituso
MICRON'S WILD RIDE
Data from Oct. 31, 1996, to Oct. 7, 1999
Source: DJ Interactive
DRAM PRICES are down. No, wait a minute, they're up. Take that back, they're down again. Welcome to the world of Micron Technology (MU).
Fact is, all of those statements were true at one time or another within the past month. Thursday and Friday, word had it that prices for dynamic random access memory (DRAM) chips in the spot market (we'll get to that in a minute) were down. That had the usual effect on Micron stock, which follows DRAM spot prices like a shadow. The shares fell 8% in heavy trading Thursday and took the rest of the chip sector down with them. Friday wasn't looking much better as the stock plunged in early trading.
But is this really something to panic about? Or was this week's flurry of positive research about the "first year of a three-year cycle" the real dope on this company and the volatile chip sector in general? Don't forget that since June, Micron is up nearly 100%. And it has soared 287% since July 1996. There's little doubt this is a scary investment. But in our view there's a whole lot more noise out there than there should be.
To understand our reasoning, however, you have to back up a minute. Let's take a quick look at DRAM pricing. The key thing to know about this commodity-like chip is that there are two distinct DRAM markets: a contract market, where chip consumers like the PC companies buy a specific number of chips at a specific price, and a spot market, where excess DRAM supply gets sold a la carte. The spot market allows chipmakers and their customers to dump their excess inventory of DRAMs when they need to. And at one time, companies like Micron sold the bulk of their production that way.
These days, though, almost all of Micron's business is based on contract pricing, which is much more stable. Nevertheless, everyone -- from analysts to investors to PC makers -- remains obsessed with spot prices. "People fixating on the spot market is still an adage," notes Credit Suisse First Boston analyst Charlie Glavin. Seems old habits die hard.
Making matters worse is that there's no single source of spot-market pricing data. Analysts and industry watchers have to work their own contacts to get the numbers, which flow into the markets erratically and are almost always subject to interpretation. There is a whole host of factors that weigh on the spot market, from PC demand to natural disasters. Figuring out what's going on is difficult, to say the least.
Which brings us to this week's action. Spot-market DRAM prices are said to be softening. But is this such a big shock? Not really, according to Ken Pearlman, a Wall Street Journal All-Star analyst from CIBC World Markets, who doesn't cover Micron but watches DRAM prices very closely. Spot prices went from $4 per chip to $20 per chip over the course of several weeks, he explains, as buyers reacted knee-jerk style to Taiwan's earthquake on Sept. 20. (Taiwan's huge chip factories make about 15% of the world's DRAM production.) "So, to see prices back off should not be much of a surprise," he says. Joseph Osha, an All-Star analyst from Merrill Lynch who does cover Micron, agrees. He said in a brief note Thursday that spot prices were too high and should come down to about $7 next year.
Just because spot-market prices are falling, doesn't mean contract prices are going to crater, Pearlman says. "Contract prices are not very volatile." But it does mean that contract prices, as they're being renegotiated, might not be as high as suppliers like Micron would like, he says. What's more, DRAM prices are notoriously seasonal. PC makers need these little memory chips when they're ramping up for their big selling season -- the holidays. As such, monthly billing for DRAM manufacturers spikes in November and then drops off until May or June, Pearlman explains.
This is a now-familiar pattern for the DRAM industry. There's another big factor to the DRAM scene: whether a surplus that weighed on the industry for three years through 1998 has been fixed. Pearlman -- a contrarian on this point -- doesn't think the industry is quite out of the woods yet when it comes to oversupply. But most everyone else on the Street sees the surplus as having been absorbed, and analysts are forecasting DRAM shortages much sooner that Pearlman. Bottom line: Most see all this spot-market DRAM talk as a distraction to the big picture.
"It's unnecessarily weighing on the sector," says SoundView Technology Group analyst Sudeep Balain.
So while DRAM prices clearly add complexity and volatility to the market for chip stocks, it's worth keeping your eye on the long term. Few analysts disagree that the cyclical trend remains upward for these stocks, regardless of the bumps in the DRAM spot market. And the up-cycle in chips has been particularly rewarding for patient (and brave) investors in the past. Anything can happen in the volatile technology sector -- but you already knew that. This week's chip weakness has a Chicken Little feel to us. |
