Good Afternoon, Tom.
Just keep in mind, no guarantee these companies
keep making money as we progress into the year.
Cisco holding a ton of inventory, and Jabil has
20% exposure there...Also with CLECs (PSINet the
disaster du jour), & ISPs going bankrupt/selling
off assets at literally pennies on the dollar,
the better off CLECs/Telecomm companies may just
wait for the weak ones to go belly up and pick up
equipment that way instead of buying it. Conservation
of capital and self-preservation are the names of
the game now, as well as trying to reach break-even.
Also remember that ECMs were built so that in
theory when/if one customer or if even one sector
stumbled, manufacturing lines could then be switched
to the healthy companies/sectors and you'd hardly
notice it as far as impact on the bottom line.
The unnerving thing about the situation presently
is that every technology sector is seeing significant
slowdown in demand. So if there is a general economic
recession (which many now firmly believe is happening),
the ECMs will take some pretty heavy duty hits...still.
A deep economic recession will cause Jabil, and other
ECMs to operate just like any regular industrial/technology
manufacturing company - ie, idle capacity and high fixed
costs. And as you know, profit margins, even in good times
are razor thin...so, in bad times....
Good luck to all.
Peter. |
