Tim and Jay,
The speed with which this alleged impending recession came is suspicious at best. This will be a test of the "New Economy" and improvements in inventory controls. It has been a V at the top, will it also be a V at the bottom? It is at least possible--even plausible, to me at least. If you go back to when Dick Cheney became CEO of Halliburton, I would bet you a share or two of SSTI that he emphasized how many problems the company had, but that it was a strong company with good employees that will thrive once the problems are solved. This is a pretty typical modis operandi for incoming CEOs, and the script has been followed pretty scrupulously by the Bush Administration. The fact that the Fed had been tightening so tightly helped squeeze things, as did, IMHO, the election debacle and the collapse of most high flying stocks. I don't know if my case was typical or not, but at the end of October, I was still up fairly nicely for the year (though not of course by the standards of the previous two years). By the end of December, I was down by better than 30%, even with a decent amount of cash. Those two months were devastating to a lot of people, as devastating I think as March and April were last year (if not more so--it represented the proverbial "other shoe"). If AG can bring down rates enough to allow people to refinance their hefty mortgages and give at least a positive tone to the stock market, we won't have a recession, I believe.
There are a couple of articles on the Blood thread which are interesting to read in this regard. One is on Atmel, predicting an end to this slowdown in just a couple of months:
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The other is from Bloomberg, questioning how bad can things be with 4.2% unemployment, and using Nevada and New England as examples of places where things are still pretty peachy, even too peachy:
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A "breather" as these folks say will be welcome. It may even help if people step back and pushout expansion plans, helping to prevent possible overcapacity problems in the future as senior managements survey the landscape. How many semiconductor companies really want to reproduce the DRAM situation of a couple of years ago where Blood and overcapacity was everywhere?
In any case, we are all in a similar position of not really knowing how demand and capacity will match up in a year. We don't really know how either side of the equation will look--all of the pushouts and cancellations--not to mention exogenous events like the CA power crisis--have muddied the situation. With regard to SST, we do know that uses for flash will increase over the next year, but we don't know how much of the low density flash sector that SST currently dominates will still be in demand, or will the cell phones, cameras and appliances that use low density flash migrate upward, and will SST be able to migrate with the market and maintain their customer base? That, to me, is the key question for SST.
Sam |
