Zeev:
As always from your end, informed and well considered thoughts, (which I have learned to pay attention to).
That said, I will remain a confirmed bear on this stock.
With respect to price, it is usually an excess of suppliers, not an excess of supply from a single source, that drives prices down.
As noted earlier, the Korean government literally "bet the farm" on chips after the Asian meltdown (i.e., policy priority). Samsung, Hyundai, et al were encouraged to go all out to acquire leadership, to ensure the all-important export volumes. Not knowing which of the newly emerging memory technologies (RMBS or DDR) would eventually prove victorious, they endeavoured to develop expertise and leadership in both. They also charged into very aggressive shrink efforts.
The bet paid off. They are very efficient (low cost) producers of sdram, have successfully transitioned to 128 mbit chips, will shortly be positioned to deliver 256 mbit chips, and are already working on moving down to .15 um. As well, they own the RMBS market and are among the emerging leaders in DDR.
So far, RMBS demand has been a disappointment to the company, but they are nothing if not patient. With no other suppliers as yet consequential competition, Samsung has no reason to cut prices.
Further worries. There are very few RMBS-based products available in the marketplace, hence demand is next to nil. Maybe demand will pick up, but again, since Intel can't supply high end micros that will compete directly with the Athlons and Athlons don't need RMBS, where does the demand come from? Intel's product announcements are a joke, given their present stumblings.
As an aside, both Intel and RMBS have got to be having sleepless nights watching their competition gobble up the tiny top end PC sector. Unless something changes and soon, there will only be crumbs left for both of them at the top end of the PC market.
The big problem for RMBS as a company is its total dependence on Intel. With Intel in a product development funk, RMBS has been left swinging in the wind.
Coming to the question as to whether RMBS holds any consequential advantages over DDR, if it does, I cannot find them (and I have tried). No need to re-list the advantages that DDR seems to hold over RMBS.
Not that this market gives a fig about appropriate valuations, but even if one grants RMBS serious, near term market penetration (which requires a massive suspension of current reality), the numbers that the company could earn do not come close to supporting a price above $15 to $20 dollars. As I see it, it is another Presstek,... a legitimate company (i.e., not a scam), but one that has no chance of sustaining the hype built into the stock price.
With respect to motherboards, we both know that RMBS setup is "demanding" as compared with the competition. Why bother?
One final point if I might, with respect to the bear's arrival. To me, he has already arrived. The A/D line has been a disaster for close to two years, the transports and utilities have been cratered, the retail arena is in the tank, most of the juniors are "semi-no-bid", the Dow has shed 16% already (and in a few weeks), and stock market liquidity is evaporating due to reduced stock buybacks (the silly debt binge is catching up with the Gerstner-look-alikes), a massive flood of IPOs (fluff-dominated to boot), off-the-graph insider selling, and a cornered Fed chief, who must continue to increase rates. The market is screaming that a fall is near at hand. Puts provide comfort under such circumstances, especially when the momentum players provide such delightfully extended targets.
By the way, don't count on the Japanese Postal System savings pool, as it has long since been drained by the Japanese government. Currently, it is engorged with force-fed government IOUs, not cash. Worse, a massive roll-over is coming up shortly (how the heck the government will accomplish a successful roll is beyond comprehension). Given the staggering deficits piling up over there, the pressure to "help out" will be huge. No wonder the Japanese government will be borrowing from their banks this year!
Best, Earlie |
