Bob:
In DRAM, we're seeing the reversal of the wave of FAB construction that began in late 1994, and it probably won't get better for another year. I've been puzzled by the inability of the DRAM market to find a bottom. The market hasn't displayed the elasticity I expected. Probably because supply was so far beyond equilibrium; we're fixing that now. Demand has been hit as well by the Asian mess. It may take even longer for DRAM to bottom out, depending on when Japan, Korea and Indonesia improve. China is the wild card. If China devalues, things will get worse.
On the bright side, digital phones are selling like crazy both here and in Europe, and the ramp for high speed data to the masses is just beginning. The Baby Bells will not deploy DSL in serious numbers until next year, but this could coincide with better DRAM markets and really allow their earning power to show through. Like you, I don't see a lot of reasons for the stock to go lower. On the other hand, I don't see much in the next six months to get it moving up either. A sale of some or all of the DRAM assets would end the quarterly water torture and probably help the stock short run, but my guess is they will stick it out because they don't need the money and can afford to wait. DRAM will be hugely profitable again someday, and when it turns it turns quickly. Two years into the next up cycle will be the time to sell it, not now. Meanwhile, second quarter will show another hit. I'm guessing .50 per share in Q2 and $3.00 for next year. Under $50, I'm a buyer. Hope this helps.
Charlie |
