Saturn V:
I beg to differ with your point of view.
Over the last two years, the main point that I have endeavoured to underline is that all the evidence in the field points to the fact that the massive growth portion of the PC sales cycle is ending (with obvious implications for semis) and that the stock prices of the associated companies must sooner or later reflect this fact. PE multiple reduction is inevitable under such circumstances particularly given the mad heights from which the semi/PC stocks must retreat and the distorted over-ownership of the group. The longer this generic shift is ignored, the worse the ensuing damage to the market will be. The fact that we are in a full-blown mania has delayed the market's normal quick response to something this utterly fundamental, but that does not change the fact that the PC sales cycle has reached maturity. Let me underline the point again,....... PC sales growth is slowing and usually slowing growth whacks PE multiples both hard and fast.
While I have frequently commented on the white box situation, it has only been in the context of the much bigger PC sales situation. If you review many of my posts, you will find that much of the info provided has related to store sales, reseller sales, distribution channel through-put, corporate sales, etc.
Please note that the major point made in the referenced post is that corporate sales are in the tank. This has little to do with white box sales.
I don't think that I have ever suggested an impending demise for either Intel or the semi industry, but rather I have (accurately, as it turns out) forecast slowing growth. Examine the numbers to confirm my point of view. Intel's operating revenues over the last dozen quarters have been stagnant, i.e., inconsequential growth. Dell's growth has been cut in half, and that includes all the accounting wizardry and non-operational baloney. The same thing is in evidence right across the entire industry. Facts are facts, whether the market chooses to ignore them or not. The big growth part of the cycle for this industry is behind us. It has become a fully commoditized situation and this always leads to falling profits and falling PE multiples.
While, as you note, the world still continues to buy PCs "in droves", the facts are that:
- even in units sold, annual growth increases are falling.
- with PC prices under pressure, the former 35-40% annual increases in PC revenues have long since fallen to flat and even negative numbers (depending on whose data one chooses to examine).
- major players are leaving the PC field (which tells us something, I believe). The ensuing market share gains that accrue to the surviving participants provides short term benefits at best.
- the related PE multiples have tended to INCREASE even as this growth has slowed.
- actual operating profits have been hit hard by slowing growth.
I don't mind criticism of my posts, but I would prefer specific indications as to where the provided info is inaccurate rather than blanket statements that I have been generically wrong. The fact that the market has endeavoured to ignore some frightening emerging trends doesn't mean those trends are non-existent nor irrelevant. Incidentally, your statement that the PC business at Dell, HWP and GTW is booming does not jibe with the reported numbers of same. The reported numbers suggest just the opposite, if you examine them in detail.
Best, Earlie |
