Ray, thanks for DJ piece. That's sort of where I thought he was coming from when it came to DRAMs.
IMHO, TI's done a good job of branching out into chips that have a higher proprietary content, so in theory they'll have a little more pricing power there and the products themselves are going to have their own various selling points against the competition.
With DRAMs, commodity pricing rules, you don't have as much pricing power, and are more at the mercy of the spot price or the contract price (which may be slightly higher). And the problem there is that each individual player may be lowering production costs, seeing unit demand rise, but if the industry-wide price is falling lower than the rate of cost reduction - you wind up with lower margins.
MU, TXN's largest U.S. comeptitor reports after the bell Monday. MU's been dropping, so maybe you intepret that as general bearishness about the report. Even though TI's not as exposed as it once was to DRAMs in terms of overall % of revenue and earnings, it's likely to react in sympathy with MU (but not guaranteed). And maybe you look at any weakness (and this assumes that MU's not going to have a blow-out quarter) as a little bit of an overreaction because of the fact that they're less exposed and look for a good long entry? But then TI itself reports in a few weeks and maybe after any rebound following any negative reaction to MU it trades back down as people get worried, but if you feel strong enough that the diversified products are going to make up for the DRAM weakness that's when you look for a good long entry? In my mind, that's sort of one way the scenario could play out, but I could be totally wrong. I'm also short-term/trading oriented, whereas someone with a different time horizon (months or years v. days) just doesn't care about anything like that. They either like TI or they don't.
Anyway, not sure when the 4.75 quoted in the DJ piece was in effect. There were reports that some of the Asian players were considering shutting lines again, as they did early last month, so maybe there's some short-term increase when/if that happens, but then you consider that the spot prices actually seemed to have fallen from 6.10 on the eve of the last shutdown, which makes you wonder where all the supply is coming from...don't know.
Good trading,
Tom |
