Moonray:
This is what happens when capacity goes down - the next few years will be good. This is the scenario I like and this is why I'm hoping for a very good 1999-2001. Also this would gel with your "consolidation theory".
"The stocks have been unusually strong, and that is in
the wake of the possible threat from Asia," said Drew
Peck, an analyst at Cowen & Co., in Boston. "Two
years ago, something like this may have battered the
stocks. Now it seems like investors have turned a deaf
ear. I think they are in denial. They do not want to
hear any bad news."
This attitude could be fueled by investors' belief that a
slowdown in Asian demand will mean less to
companies that have limited exposure to Asian
markets.
To a certain degree, that may be true. But when
buying power in a dominant growth market is cut in
half, as is happening in Asia, the domino effect is not
likely to be positive, and the March quarter may be a
reality check for investors, according to Peck.
Others, however, are more bullish on what lies ahead.
While Asia remains a sore spot, the industry's
exposure is limited, said Dan K. Scovel, an analyst at
Fahnestock & Co., in New York.
The Asian crisis "is not one of the primary drivers for
the companies we follow right now," Scovel said. "It
doesn't hold a candle to the manufacturing problems
or the product transitions or the other things that
dominate the landscape. The bears may argue that we
haven't felt anything yet. But when semiconductor
companies have 3 percent to 8 percent of their
exposure in Asia, how much damage can this do?"
Despite differing opinions on the latest round of stock
market activity, analysts said they expect 1998 to be a
disappointing year for high-tech investors. But the
outlook for 1999 is for improvement.
A decline in global capital spending this year
compared with 1997 will be one of the key factors
behind next year's improvement in the technology
industry, particularly the semiconductor sector, said
Mark Edelstone, an analyst at Morgan Stanley Dean
Witter, in San Francisco.
"One of the biggest problems in the semiconductor
market is the companies will be fighting excess
capacity," he said. "It's good to see they are cutting
back their capital expense plans. They were
overbuilding capacity in the 1993, 1994, and 1995
time frame. These cutbacks in spending will help the
supply-demand situation."
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TSO: especially check out last 2 paras. That's why that little 1 billion error in semi-equip spending last year made me happier!
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