I think the downturn in the ECM sector today was just as much,
if not more so, apprehension over the apparent slowdown in the
wireless communications sector, as it was with the 3Com
announcement, IMHO. Note the downgrades of Ericcson and
Nokia. If the communications sector slows down that is bad
news for computers. From the vantage point of what I do for
a living, the general feeling is that it's not software that
will drive the next level of computer use, it's the communications
revolution that is going to drive the next technology uptrend.
Paul, first off, nobody wants the ECM stocks to go up
as much as I do, and I think that pretty much sums up
the general feeling of people on this thread, and the
fact that most of us have a lot at stake here.
The problem for me is that if I use different starting
points, I end up in completely different places. If you
start from the ECM companies and the sector itself, business
is excellent and the long term secular trend toward outsourcing
manufacturing will provide additional boost to the long term
growth trend of technology. The fact that plants are located
in Asia, but the products themselves are destined outside of
Asia, means that if anything, cost of production will fall
and profits rise through higher margins, and/or higher sales.
The fact that the large ECMs are diversified among at least
four to five major customers cushions the blow from product
problems from any one customer. Hence all in all major
trends remain intact with a few minor bumps.
But if you use the Far East as your starting point, for me
at least, the picture that emerges is very different. An entire
global region has been thrown out of kilter and is struggling
against economic collapse. Demand will fall across the board.
The Asian countries will try to export their way out of the
mess they're in. US companies, if not all multinationals,
will face a double whammy - that of falling demand from that
portion of goods that were destined for Asia, and increased
competition of cheaper goods sourced from countries forced
to devalue their currency. As multinationals face tougher
times and shrinking profits, they'll respond by cutting
capital expenditures and trimming labor. And so there should
be some semblance of a domino effect. From this vantage point,
it's questionable if the trends affecting the ECM sector will
remain quite so positive.
There is a connectedness here, but what it is and whether
I've got it straight - well who knows?
I know bearers of bad news, and dissenters, aren't
generally viewed favorably, so I will stop here.
|
