Hi tp,
I've followed your posts for quite a long time and I've developed a high degree of confidence that you see the world as it is. I won't dispute anything that you say regarding SCMR or CSCO, but I will say that there are storm clouds on the horizon and I'm hoping to come across as being cautious and not petulant about what I sense out there.
A very interesting comment was made about 2 weeks ago by Jim Cramer at theStreet.com. Not a favored commentator of many, but he said something that really hit home with me. It was in the context of discussing guidance from JDSU regarding the prospects for 2001. He said that the situation reminded him of the tipping point in hard disk drive suppliers in 1983, when a company called Komag projected exceptional growth going forward, only to be blindsided by the over-supply that was being built into the system as far too many competitors entered the field. Much like we are witnessing today in the fiber optic component sector. Keep in mind that JDSU is the dominant player on the field and they are projecting a four fold increase in manufacturing capacity within a year. This must have an impact on profitability. Econ 101 does not work any other way. We are headed for oversupply of FO components. Anyone arguing otherwise is simply not paying attention. Profitability craters, and as I pointed out last Saturday, this industry in aggregate already is a loser, to the tune of $2 Billion last year. Eventually, even the diehards realize that you can't keep putting faith in the equities of an industry that has a supply imbalance. I know this seems heretical, and almost ludicrous in view of the projections of SCMR and CSCO, but if you step back and look at this thing in the big picture, we are about at a saturation point on the Internet where almost everyone who is literate, intelligent, wealthy and inclined to has already gotten a straw into the Internet pie. Of course there are billions of folks who aren't there yet. But you don't get a single viable Internet customer from the 3 billion individuals who are surviving on less than $2 per day. So, I see end demand slowing from here. Others will disagree. I'm just trying to do some big picture work, and it seems that we are on the tail end of the Internet bubble.
Best, Ray |
