Especially Sultry if Kurlak is right:
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Dim chip outlook
Merrill Lynch issued a reminder that all is not well with the semiconductor
industry. Analyst Thomas Kurlak said the industry downcycle has
progressed to layoffs and order cancellations as a result of overproduction,
and chip prices are eroding in every market.
Kurlak said that in this deteriorating environment, further inventory
reduction is likely for chip suppliers as well as the capital equipment
makers.
A report from Dataquest reinforced Kurlak's comments as the research
firm said the Asian financial crisis, low memory prices and general
overcapacity and pricing pressure will hamper semiconductor growth this
year. Dataquest said 1998 will be the third consecutive year in which the
industry grows less than 10 percent.
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Layoffs? Order Cancellations? Mmm... Is LSI therefore not a semi stock because they have nothing like this going on? Likewise with some of the niche players and analog companies...
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Musing #1: Who knows but this is beginning to sound like the doom and gloom of 1996. People thought LSI would be able to withstand the downturn at that time - they were wrong. Let's see if LSI has learned. I think this time is different and though if there are huge problems I do not think LSI will prove to be totally immune, they are not close to the PC market and their inventory went down and their lead times are up and there wasn't a huge increase in revenue in the preceeding q (indicating high ordering) and best of all the "new" consumer chip markets and LSI's diversification and the strength in communications and networking might buffet them. All very different from the conditions for 1996.
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Musing #2: The funny thing about LSI this time around is that as I run down the list of markets for them all appear to be building strength: Video games, STBs, MPEG-2, DVD, DCAM, FC storage, workstations, ATM, telecommunications, other networking, GSM (new), CDMA (new). I may be in la-la land myself but it is rare to see no weakness and building strength in ALL the areas but I do not see any. Once again maybe LSI has grown up. Call me naive...
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Musing #3: I don't understand why Kurlak is not more bullish on LSI. His comments about a lack of PC exposure and the internet paradigm that he made in respect to VLSI and TXN a few weeks ago and that the early recognition of this trend bodes well for these companies to weather a downturn applies 5 times over for LSI. With the exception of some of the special niche companies I do not know of a big semi that plays into these trends better than LSI. Maybe he was busted before on a LSI rec. or maybe he could care less. Or maybe he does not want to hype a stock in the industry only to get burnt by a collapse in the sector later on. Or maybe everyone's waiting for the market collapse and virtual rate hike this May and figuring they will be buying on the dip. Dipschticks... (actually prudent IMHO) :-) It's people like me heavily exposed who will be toasted in a downturn...
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Shane. |
