"Cancellations are slowing because there is less in the order backlog to cancel..."
Supercomm 2001 Update
S Randall
Regarding outlook, there is no change from the outlook indicated a few weeks ago at the N+I show. There is still limited visibility. Most vendors we spoke to seemed to agree with Xilinx's comments, that cancellations are still continuing but at a slower rate. The feeling on the show floor however, is that this does not indicate a strengthening market - but rather, cancellations are slowing because there is less in the backlog to be cancelled. Despite the slowdown in buying components, equipment OEMs are not slowing down design activity - if anything, the IC manufacturers are seeing this activity intensify. The bigger OEMs are trying to use the downturn to increase their lead, and the smaller vendors are attempting to establish a position at the technology's leading edge. An important theme at the show is one of "value-added" services, allowing service providers to gain additional revenue from existing infrastructure. The network processing space, which we highlighted in our piece last week, is a significant area of interest. We still advocate buying Applied Micro Circuits and PMC-Sierra on down days, as long-term value plays. However, we do not read the current sentiment to mean that a turnaround will occur quickly. We expect to see another down quarter for Q2, a relatively flat Q3, with potential for growth during late Q4, or during Q1 of 2002.
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