Worldwide strength in the personal computer sales and affiliated supplier businesses bode well for technology stocks over the next 4-5 quarters, a leading industry guru said today.
SAN DIEGO--(BUSINESS WIRE)--Oct. 21, 1997--
Michael Murphy, editor of the California Technology Stock Letter, said that
despite Intel Corp's (NASDAQ:INTC) recent cautionary pronouncements about
revenue growth, "Everywhere else we check we're finding the PC business is
very strong and should remain strong for the next four quarters as worldwide
the conversion to Windows 95 and Windows NT continues."
Murphy, author of the soon-to-be-released book, "Every Investor's Guide to
High Tech and Mutual Funds," is the keynote speaker at the 1997 Informed
Investors Electronics & Technology Forum Sunday morning Nov. 2 in San
Diego.
Companies scheduled to give analyst-style presentations to individual investors
include Credence Systems (NASDAQ:CMOS), In Focus Systems
(NASDAQ:INFS), Trimble Navigation (NASDAQ:TRMB), Learnout & Hauspie
(NASDAQ:LHSPF) and Watkins-Johnson (NYSE:WJ). Notice of participation is
pending from several other companies. Up to eight companies may present.
The Forum runs from 8 a.m. to noon at the Mission Valley DoubleTree Hotel.
The cost is $15 pre-paid, $20 at the door which includes a continental breakfast
served at 7:30. Investors unable to attend may order tapes of the Forum for $25
for four company presentations and Murphy's commentary. To register or order
tapes, call Informed Investors Forum at 800/992-4683.
"Intel is very careful and always tells analysts what its customers are telling
them," Murphy said. "But what needs to be known is that Intel's customers are
changing the model they use in ordering. Many more are following Dell
Computer (NASDAQ:DELL) and Compaq's (NYSE:CPQ) lead and following a
build-to-suit strategy."
Further, according to Murphy, many PC retailers are adopting a "just in time"
distribution model to tighten the retail channel such that retailers will re-order
PCs as they are sold off the shelves. This reduces the level of inventory
exposure.
"Also, it gives the PC maker the opportunity to order the specific chips the retail
customers want," Murphy said. "If Pentium II machines are popular, they'll
order Pentium II chips, etc."
Murphy predicts Intel will announce "sometime in November" that its revenue
projections will be better than earlier thought. By then, he said, the inventory
adjustments will have been absorbed and the underlying strength of the overall
PC market will prevail.
Murphy believes other chip makers, including Advanced Micro Devices
(NYSE:AMD) and Cyrix (NASDAQ:CYRX), "will ship all they can produce
because PC makers want alternatives to Intel chips." But production problems
remain a hazard for the second-tier chipmakers, he cautioned.
Strong quarterly earnings reports from Microsoft (NASDAQ:MSFT) and IBM
(NYSE:IBM) came as no surprise to Murphy. "While the summer quarter always
has cross currents and is the weakest quarter of the year for techs, it's not
surprising that Microsoft and IBM had good earnings. And the fourth quarter
will shape up to be strong."
Even companies that reported weaker-than-expected earnings, such as LSI
Logic (NYSE:LSI), should rebound in the fourth quarter, Murphy said.
Murphy doesn't believe the rumored Lucent Technologies (NYSE:LU)
acquisition of Ascend Communications (NASDAQ:ASND) will
materialize. "Lucent can get most of what it wants by partnering with
Ascend," he said. "Also, why would Ascend want to sell out at this price
when in six months, with it getting its acquisition of Cascade under its
belt and improving business, its stock could be worth 50 percent more?"
Overall, Murphy said the strong PC market will lift related industries and
suppliers including disk drive makers, semiconductor manufacturers and
semiconductor equipment manufacturers "from Applied Materials
(NASDAQ:AMAT) on down."
Among the companies Murphy anticipates will benefit from a strong PC climate
are Seagate (NYSE:SEG), Western Digital (NYSE:WDC), Cirrus Logic
(NASDAQ:CRUS), IDT (NASDAQ:IDTC), and Cypress Semiconductor
(NYSE:CY).
"Mattson Technologies (NASDAQ:MTSN) is our favorite among he semi
equipment makers," Murphy added.
Forum organizer Informed Investors of Sacramento has been providing
investment education to individual investors since 1993. For more information,
call 800/992-4683.
916/448-8222 or 800/992-4683 |
