Jabil: More inventory insanity?
By Herb Greenberg, CBS MarketWatch.com
Last Update: 12:07 PM ET June 17, 2004
SAN DIEGO (CBS.MW) -- Thursday thwack:
Inventory insanity: Seasonal? Not seasonal? Time will tell, but keeping with one of this column's long-term themes, inventory continues to build in tech-land. In its earnings warning Wednesday, according to JP Morgan analyst Chris Daney, Jabil Circuits (JBL: news, chart, profile) cited "inventory build by a broad base of customers in the IT supply chain, with customers having the ability to meet market demand with current inventory. While the magnitude is slightly negative for EMS companies, we believe it is more negative for suppliers further down the food chain more exposed to inventory builds, such as semiconductor companies.
"This correlates with our concerns on increasing semiconductor inventory levels throughout the supply chain following our recent Asia visit. We believe this is yet another data point supporting our thesis of excess inventory in the channel resulting in risk" to chip stocks for the rest of this year and next year, as well.
He adds, "We believe we have already seen evidence of the impact of the inventory build in companies such as Fairchild (FCS) and National (NSM), which appear to be experiencing order cancellations and push-outs. We believe the increased inventory throughout the supply chain is a result of past increases in lead times, expectations of future price increases, and the desire for buffer inventory before the seasonal pick up.
"We continue to believe the semiconductor industry is on the verge of a cyclical downturn." |
