IDTI - an IC Play on Growth Markets Message Board

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Technology Stocks : IDTI - an IC Play on Growth Markets

IDTI 48.99

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Mar 29 5:00 PM EST

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To: Return to Sender who wrote (11413)	7/26/2002 12:12:15 PM
From: Rob S.	Read Replies (1) of 11555

The telecommunications sector took over as being the largest single user of ICs from the PC/workstation sector a few years ago. A significant portion of the boom in the semi sector over the past ten years has been due to the rapid expansion of the Internet and long-lines and wireless communications. A large part of the infrastructure was over-built. That won't be absorbed completely for at least another year and possibly three. I'd give it 18 months at least before a robust recovery in telecomm spending occurs. Demand may start to pick up, particularly for some areas such as IP data services. A big part of the problem is that the high end categories are constrained by both corporate conservatism and it being a "buyers market" and by the huge debt that will continue to overhang the long distance and wireless industries. Big Boom = Big Bust. Perhaps if management of U.S. corporations had not been so grossly over-compensated for shooting first and asking questions later (building out and acquiring) the boom would have been tempered by more reason and thus the bust wouldn't have been to such an extreme. It certainly looks that way to me. Some sectors of the economy are doing well. The "grass roots". That creates demand for many products and services. What I have expected to see is so far being confirmed: a gradual increase in quantities but a simultaneous reduction in ASPs (average selling prices). With the single most important sector remaining under pressure the overall supply/demand climate is unlikely to change quickly. over time the reduced cost of products and enhanced features will overtake the equation. But that will take more time imo. Some areas to watch out for is the wireless broadband area including WLAN and WMAN. The WLAN segment is growing despite everything. The WMAN (wireless metro area network) segment is still languishing without a standard and because it is more dependent on dedicated capital and roll-outs that is more constrained than the more consumer and small budget oriented WLAN segment. Another area that might start to consume more importance is the flat panel display and digital TV segments. These are being driven by somewhat similar dynamics: as the prices go down for flat panel displays and electronics including memory the market opens up. DVB will continue to be constrained by the lack of universal broadband "First Mile" connects (as opposed to "last mile" - same thing but with a different perspective). I think these areas will finally come together over the next five and ten years to become important drivers for the industry. What is likely is that no single area will be THE important factor to cause the semi sector to rise from the ashes. Rather it will be a broader array of uses that grow due to reaching cost points of mass for product features and pricing. IDTI is in much better shape during this cycle than several years ago. They are much better positioned in terms of products and in terms of facilities. This makes it a much more manageable company - able to reduce costs while still remaining very competitive and flexible. I like the management team - as long as they stay directed and reasonably humble. They are doing an overall very good job imo. The valuation of IDTI has been speculative but now has come down to a reasonable level for both short and long term investment. We are likely to see continued pressure on the semi sector through this fall with a probable rebound in between - starting soon if not now. Beyond that I think the golden time to invest in semis will be between now and a year from now. How's that for pinning down my predictions?

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