Hi Jim:
First, let me indicate ir was not my intention to
make you feel bad-- the current market for tech stocks
is more than enough to make all holders of long positions
totally ill.
When evaluating semiconductor stocks, you have to realize
that even though they are all lumped together as one big
group, they can be divided into distinctive submarkets:
a) Commodity chip makers, which includes DRAM and SRAM
companies such as MU, CY, IDTI, to which I would add
audio chips and graphics chips companies. These companies
are subject to horrendous cycles of oversupply and later
undersupply. Now we are in the oversupply period, due to
the devaluation of Asian currencies. Within this context,
even well managed companies such as CY get crunched.
Because of the cyclical nature of this market segment, I
tend to stay away from it, but anyone can make good money
by buying at the bottom of the cycle (probably within the
next 2 to 3 months) and selling at the top.
b) Microprocessors: INTC, AMD, Cyrix (now part of NSM),
and IDTI. THis is a segment that INTC dominates totally,
but where INTC's huge margins will probably erode
significantly.
c) Analog and DSP companies: ADI, TXN, LLTC, MXIM. This
is probably the most attractive sector. If the semi
market crashes completely over the next 2 or 3 months,
and if you have some money to invest, you might want
to look very closely at the above 4 companies.
This is what I meant when I made the comment :
''why buy MLIN when you can buy well managed
companies at a reasonable price.'' MLIN straddles
this sector and the next one.
d) Networking chips: PMCS, LEVL, Broadcom (a private
company), ICST ... This is also a very good sector.
The reason why analog and networking chips companies are
preferable to commodity chip makers is that they are not
subjected to huge price cycles. The chip prices typically
follow product cycles: the margins are very large as a new
generation of chips are introduced (fast Ethernet early
this year, gigabit Ethernet next year), and then erode gradually
as more companies compete for the same market.
e) Programmable logic devices: ALTR, XLNX, Lattice. The
margins are also good, but I do not know enough about this
sector.
f) ASICs: LSI, VLSI. These companies are intermediate
between the commodity and specialty chips segments.
Given this broad picture, to evaluate MLIN, you have to
compare it to LLTC, MXIM, or LVEL and ICST. If you look
back a few years ago, MLIN was not significantly smaller
than LEVL and ICST, but it has trailed them badly during
the last 2 years. On a comparative basis, one has to conclude
MLIN is not as well managed as it could be.
Best regards,
Bernard Levy |
