Haim:
I disagree.
PCs have been fully commoditized and are quickly going the way of the TV set. Worse, even if a PC replacement cycle were to commence (and without new applications, why should it?), the margins are less than "razor-thin" (as in non-existent). Even worse yet, most investors are starting to recognize that this is no longer a "growth area". As that concept becomes generalized, the current bloated PE's will be pounded into the dirt.
Secondly, profits, that is real profits are becoming much more important to this market as cynicism sets in. Very few companies across the whole tech sector were able to generate real profits even during the bull market, but rather had to spend truck loads of easily obtainable equity dough raised each year, just to stay in the game. That money is no longer available, hence a percentage of the current players will have to be trashed. This will be hard on the survivors, for quite a while, given the inevitable, fire sale prices that always prevail as debtholders take over the wounded and liquidate excess inventories.
Thirdly, the degree of excess manufacturing capacity found across most of the tech sector is nowhere near washed out, consequently selling of products at or below cost-to-produce will prevail for a lengthy period of time. This is not the stuff of which profits are made (so back to point one).
Fourthly (is there such a word?) both the inordinate debt loads supported by some tech companies and the accounting rubbish supported by most, will have to be exorcised before any real move in the sector can take place.
Fifthly, the tech sector absorbed far too large a fraction of the available investment dollars during the mania and this too has to be "washed out" one way or another. Obviously many of those dollars have already passed on to a new and glorious everlasting peace in "money heaven", but the bucks that remain exposed to this sector are increasingly in the hands of restless, scarred investors (both professional and individual), hence the "sell-if-it-bounces-at-all" syndrome will tend to prevent any large scale advance.
Sixthly, to whom do they sell their products????? This is by far my greatest concern. Corporations are not going to be consequential buyers of anything for the foreseeable, so the consumer has to carry the can. Unfortunately, he is saturated with tech products. China and Asia will fill in? Not much more than a dream. If Asia doesn't sell to the U.S., then that whole region is in a steep-sided crater, and the evidence at hand supports the view that the U.S. consumer has to be reaching his debt limits.
To me, it appears as though the Naz is now well entrenched in a blossoming bear market. Of course we will be called upon to endure violent rallies, but the trend is there (understatement). Without profits it is difficult to make a case for a return to a bullish environment and there is precious little case that can be made for profits in this sector.
Best, Earlie |
