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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 162.19+2.2%3:24 PM EST
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To: Cary Salsberg who started this subject3/21/2001 10:51:56 PM
From: brunn   of 10921
 
Micron's conference call has interesting information that explains recent outperformance of PC sector/semiequip sector vs. network/communication. Basically, excess inventory in PC area has been depleted while excess inventory in network/communication still is present. They explained that PC makers foresaw inventory excess several months ago in the 4th quarter of 2000 and were able to work their way through it by February. Meanwhile, the inventory excess in the "netcom" area was only discovered recently and they give the standard response of "poor visibility" when asked about when the netcom inventory correction will be resolved. When pressed, they guessed that it may end by July, if it follows similar timeline as the PC correction.

It appears there is an approximately 4-6 month lag between when problems were seen in the PC sector vs. when they were seen in netcom sector. There also seems to be a 4-6 month lag between when the inventory problem was first appreciated and when the excess inventory is depleted.

This explains why AMAT, Dell, MU bottomed in the 4th quarter of 2000 and have shown excellent relative strength since. It may indicate a bottom in the Cisco's and JDSU's over the next couple of months if their business timeline follows the PC business timeline.

I have been perplexed at the outperformance of semiequip stocks relative to the technology sector and I believe this may be part of the explanation--prior to this I had been guessing it to be related to INTC's cap ex plans vs. valuation concerns.
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