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Technology Stocks : Praegitzer Industries (PGTZ)
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To: kolo55 who wrote (117)9/10/1997 5:31:00 PM
From: Sid Turtlman   of 196
 
Paul: Perhaps you or Creditman could address this question:

I took a look at the pcb industry around 1990 or so when things were tough. The trend toward outsourcing by the HWP and DEC's of the world had started, but there was still too much excess capacity around from past industry overexpansion, and pricing was very competitive. I recollect that most jobs, even complex multilayer ones, were being bid at gross margins of 12-15%. I bought one or two stocks, a year later I was bored or bearish or something and got out with a small profit and forgot about the industry.

Now I look at it again and see that things are much better. Gross margins seem to be up closer to 20% for most players, with a big impact on earnings and P/E's. (I should have held on!) But with the much better results there have been many companies in the field going public, and many additional stock offerings that have probably raised hundreds of millions of dollars over the last few years, most of which has gone to expand capacity.

My question is this: Is there a chance that capacity has risen too much? Might we be in store for a rerun of the competitive, low margin environment of the late 1980's early 1990's? It seems as if some companies are starting to report some revenue and earnings weakness - could that be the start of a negative trend? Thanks.
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