Steve: Thanks for comments re bto-jit.
Re Japan taking over the world....this has never been an opinion of mine. My view has simply been "supply overwhelms demand". It's been my view for close to two years, and has been continuously reinforced in the field and by recent events. For the first time in those two years, it appears that the markets may be starting to examine and perhaps even starting to discount this very big problem. In the end, the market will be forced to do this anyway.
With respect to Asia, I think this last few months have provided a fundamental and very nasty shift in the viewpoint and spending plans of that dynamic region. One does not contemplate the purchase of non-essential-to-survival products, when one has just experienced a personal financial wipeout, which is exactly what has occurred to many Asian consumers. Most N. American tech companies, and especially the PC manufacturers, have been very vocal in their belief that shrinking demand and increased supply in N. America is not something to worry about because of the robust growth of Asian sales. This simply is not going to play out as they expected.
As I see it, the PC producers as a group are already experiencing the problems I expected and outlined in many postings. Those problems are evident in dramatically reduced ASP's, companies exiting the field, and reduced margins.
I wouldn't argue that a few will survive, but all of them are experiencing bruises and this is just the first round. Asian producers now have only one tool with which to climb out of the deflationary hole, and that is exports. The currency devaluations strengthen their ability to so do. It's not going to be easy for our producers to make profits in this scenario. If demand does not pick up (and there is nothing out there that I can see that would cause this to occur), then once we get on the backside of this "high season", the early Winter is going to provide a bunch of nasty earnings disappointments. Already, the Q4 "pre-announcement" period is underway, and it's both early and negative
I see CPQ as a survivor, but I also see their stock taking a hit, as it sinks in that PC production is a tough game in which to make profits. . Dell's direct approach is being copied by everybody, and this will keep the pricing pressure on them. Both companies are well run and financially strong, but there is only so much that a company can do to cut costs. What could save things would be the appearance of a new, and broadly appealing application, but I don't see any on the horizon.
One last consideration: If the Asian deflationary flu spreads to N. America (and this is almost inevitable), our over-valued markets will also be pasted, which in turn will slow our economic activity (the N. American consumer is already humping a historic debt load but "feels" rich because his stocks are up). I expect things to become very ugly in the markets in the near term.
For my kids sake, I hope that I am wrong, but every sixty to ninety years, large accumulations of debt get cleaned out through depression-deflation. We may dodge the bullet for a bit yet, but the evidence that the day of attonement may be at hand, mounts
Best, Earlie |
