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Technology Stocks : Deswell Industries (DSWL)

DSWL 3.700

+0.1%

1:48 PM EST

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To: j rector who wrote (278)	11/26/1997 11:30:00 AM
From: Ron Bower	Read Replies (1) of 1418

j, Raw material - I didn't really say what I meant to say. IMO, a devaluation would result in high costs for raw material if they are buying in $HK and it drops. They have many other expenses that would also be based on $HK that would lower and have an offsetting effect. I would think these expenses would be a higher percentage than the raw material costs. For now, it doesn't appear that the $HK tie to $US will be broken and the question may be mute. For next Q I expect we'll see a major increase in revs and an earnings increase but much lower margins. While the plastics, metal, and board manufacturing will continue to have high margins, the addition of assembly to the mix will lower the overall. Adding assembly makes sense and it's almost amazing that they hadn't been forced into it before. Logistics is a major problem in all of SE Asia. If they can eliminate some of the shipping and handling, they substantially lower unit costs to the customer and shorten order to delivery time. I am truly amazed that Deswell is being sold at this mornings level. Had I even dreamed this would happen I sure would have played it different. Oh well. For what it's worth, Ron

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