I don't expect MUEI to fix their problems anytime soon and that is why I will not go long in this company near term. But more importantly, the entire PC sector is about to undergo their own downward cycle, actually it has already begun. Technology undergoes cycles every so often...this is a fact. Last year, the networkers were hit hard and CSCO remains the only company still standing on firm ground. Early this year, the drive makers began their tumble, they all have been hit for 50% losses and not even the leaders(SEG, WDC) could escape the pressure; recovery is not near yet. Recently, the semi's/DRAM companies have been shaved down for about 50%. What sector is next in this viscious cycle? You guessed it...the PC makers. How long will the PC makers suffer?? Count on the downward pressure for at least 2 Q's....these cycles do not just last a few months and if you don't believe this, you are in for a rude awakening. DELL reports Monday and they will most likely make earnings since they have quality management unlike MUEI, but will DELL save the industry from selling off, I doubt it, and you will see the market sell off DELL even if they make earnings(just like AMAT).As far as takeover talk, I've heard the same thing with ASND, BAY, FORE, PAIR, IFMX, AAPL, UIS, NOVL, etc, etc, when these companies were at their lows. This is what's known as false hope. Don't expect another company to come and bail MUEI out from this big mess, it is NOT GOING TO HAPPEN. The early signs of this fiasco could have been found in last Q's earnings...here it is:
AUG 29, 1996 inventory- 69,863
AUG 28, 1997 inventory- 115,501
It's going to get worse before it gets better.
Brian |
