Thanks.
I agree, if you look at expected 2002 EPS and sales, just about every semi is overvalued. Buying the dip now in these stocks, is a bet that consumer spending will hold up, pricing power will come back, and EPS estimates are soon going to start being ratchetted upward. And that, until those earnings start going up a lot, investors are going to continue to pay for earnings further out (2003 earnings and beyond). It could easily turn out differently.
You're right, TXN has not been immune to competitive pressures. Their pricing power has dissapeared. I'm not worried about this, because I see the same thing happening in lots of other tech companies, even the best ones that have strong franchises, like EMC and AMAT. It's a macro problem, not a company problem.
And the great thing about overcapacity in semis (and semi-equips) is, they go away quickly, because the equipment goes obsolete so quickly. A 5-year-old factory for making cars or mobile homes or refrigerators, is not obsolete. Overcapacity in those industries can persist for many years. In semi fabs, for cutting-edge applications (like what TI does), a 5-year-old factory is junk. I remember, at the bottoms in 1996 and 1998, predictions that the semi downturns due to overcapacity would go on for years. They didn't; they can't; semi overcapacity never lasts more than about a year.
Investing in semis and semiequips is really very simple: buy on despair, then wait. |
