JHP:
Like Mr. Murphy, I'm a tech analyst. Unlike him, I've been a bear for more than two years with respect to the "tech sector" (at least as it relates to the PC/semi/telecom stocks).
I do not share his conviction that the tech stocks are "the best place for you to invest your hard-earned money in the months and years ahead". In fact, I see continued exposure to the "tech sector" as an invitation to a disaster, particularly given the insane valuations found (at least until this last few weeks) across the sector.
I think that I have spotted one of the reasons why we see the sector differently. Our research methods differ. In Mr. Murphy's case, I note a reliance on the views of company officers and various industry-related organizations. At this end, our concern is with what is actually going on across the whole distribution chain (i.e., from the producing company through distributors to consumer), as well as with the views of engineers within the companies that are of investment interest to us (who experience has taught are much more knowledgeable and dare we say it, more "accurate" in their views than are company officers).
My research suggests precisely the opposite to Mr. Murphy's view. Having criss-crossed the U.S. (from coast to coast) this summer, I can state unequivocally that the PC sales environment is the worst I have ever witnessed. One word sums it up,.... saturation,.... and that saturation extends right across the distribution channel. Of course, the fact that corporations (which as we both know, historically soak up close to 2/3rds of all PC purchases) essentially ceased PC purchasing last September, has much to do with this. (witness the several abrupt bankruptcies of major resellers this year), but even within the consumer sales arena, demand is soggy. Inventories rarely tell lies and they are huge.
Every bit as worrisome to me is that fact that things are not much better in Telecom land. How many new customers still exist to purchase the output of massively expanded cell phone production? And what are we to make of the fact that telecom equipment producers have been forced by the brutally competitive nature of their game to become "financial houses", financing not only the purchases of their clients but also the installation costs of same? In an era where the prices of all services within the telecom sector are in free fall (price wars), it is far from a certainty that payment will eventually be made for all this grand infrastructure "build-out".
Several years ago, I commenced building a file of the utterances of the various "tech sector" research organizations. I did this because the level of accuracy of their predictions was,....... ah,.... inevitably "optimistic" (to be kind), usually to the point of being embarrassing in the follow-on period. I haven't noted any change in this pattern of late
It is also a fact that the balance sheets as well as the accounting practices of many tech sector participants have deteriorated to the point where some are now perilously close to "the line". While a rhetorical question, one can't help but wonder what might be Mr. Murphy's reply as to why this has occurred if things are in such delightful shape.
Best, Earlie |
