interesting snippet from Fleck tonight:
PC = Pure Commodity: In any case, during the mania, I continually made the point that PCs were nothing more than TV sets, and that since the companies producing and selling them basically did no R&D, they did not deserve premium multiples. For that analogy, I was routinely booed, but I think it's appropriate. Ladies and gentlemen, the PC industry is a pure commodity business that is also saturated. PCs are sold on price. Most of the companies that produce them still spend virtually no money on R&D. Nothing associated with the PC industry deserves a premium multiple.
Recipe for Shortcake: I bring all this up because it seems to me that Dell is uniquely vulnerable this quarter. As good as Dell is at selling PCs, its stock is grossly overpriced, and the company has a very aggressive revenue and earnings target. Given what's happening on the pricing-pressure front, I think that Dell stands a very high probability of missing the earnings estimate it has set for itself. And yes, I am short the stock.
Chips That Tumble From Dropped Jaws: So, once again we know that there is an inventory problem in the PC industry, and to this, we can add that cell phone inventories may also be high. As I was noting before my vacation, those two industries consume about 60% of the chips that are manufactured. By extrapolation, therefore, the chip stocks that just saw a huge run are vulnerable, and likewise, the chip-equipment stocks. In the last two days, I have shorted a handful of chip stocks and chip-equipment stocks, as per the plan I disclosed yesterday. I think that in the next few weeks, these stock prices will be most vulnerable to rather large declines. In fact, I think that next week will be a black hole for tech stocks as the horrific first-quarter guidance for companies like Intel makes peoples' jaws drop. I expect trouble, as a lack of demand, combined with excess inventory, collides with expectations that are way too high, magnified by valuations that border on absurd. |
