Impact of Asian Flu on ECM companies
Smart Modular(SMOD) is getting pasted today.
They had a dismal earnings report last night, with even worse forward looking statements, and today the stock is off over 7 points to the 14 range. Compaq is their biggest customer, and is hurting, and is sending some orders to a Far Eastern supplier, Tanisys instead of SMOD. There is an active thread on SMOD.
SMOD really is more of a component supplier, than a contract assembler. They design and make memory modules. Last year, there were three really high fliers in the ECM group; SMOD, SANM, and JBL; all commanded premium PEs. SMOD has been hammered badly over the last several months, and JBL is trading at less than half of last fall's high. SANM commanded a premium multiple due to the high margins in the backplane business, which seems to be growing strongly and is not threatened by Asian competition yet. They also have overseas plants in Asia.
Its interesting that when the Asian flu hit last fall, that first all the stocks in this sector were slammed. Now the earnings reports are showing who was really susceptible. The board makers like HDCO, Merix, Altron, Praegitzer, and DIIG's Multek division, have all been knocked down. DIIG has mostly been knocked down by the problems at Orbit, their ASIC component supplier that is seeing pricing pressure and execution problems. Smaller board shops are getting killed. Anyone who makes high volume production of less than 8 layer count boards is really getting hurt, as pricing in that segment has softened significantly. I put some posts on the Hadco thread, after listening to the Hadco conference call last night(start with this post and read the next two as well in sequence):
Message 4554132
The other company hurting because of Asian crisis, as well as PC inventory channel correction, and probably the growth of the sub-zero PC, is SMOD. As a component supplier, they are seeing competition from Asia, and pricing problems.
Plexus had one bad quarter due to the loss of three smaller customers to overseas suppliers. The other domestic ECMs mostly saw flat revenues as they lost biz to the international players. The big international players so far have come through OK, but Jabil and Solectron did issue warnings about the next several quarters.
Paul |
