Judy, I think that the semi equip. have some way to go down yet, and expect them to lead a general decline in the market in February. The rate of investment by the semi in equip over the last few years is just not sustainable, and while one would assume that competitive pressures would drive the .25 conversion, I think that these pressures might abate as some capacity is taken off line (written off completely?), thus short term, the equip segment is dangerous. The semi themselves might weather the storm a little better because I can see a situation where the weaklings are weeded out, but not before these make a final effort to stay in the game selling heaps of inventories, thus short term I think the semis themselves have some way to go. I good test would be if MU can hold the recent low of 22 in a major decline, or about 26 in a mild one.
The beneficiaries of the gluts in semi are the box assemblers like CPQ and DELL. Unfortunately, I am afraid that CPQ swallowed more that it can digest in DEC and I am not sure if Pfeiffer (?) will be much better than Palmer in running the albatros that DEC has become, so I think that CPQ will have some tough times ahead. DELL might be a little overpriced here, but their business model is working like a charm, they may end up benefitting from CPQ diverting some of its top management attention to swallowing and digesting DEC. As far as trades on CPQ, I think it is a short until about June. Dell, could drop to 80 or go to 120 (the former, if I am right about the market coming tumble), and a straddle is probably the best approach, IMHO. I apologize I cannot be more specific than that, it comes mostly from ignorance.
Zeev |
