Judy,
I know we are different style of traders..
I cant stand holding the same stock..it is tough for me.
And BTO is IMHO very applicable to chip building. I know that there arent alot of components to chip making, but as the prices lower, the co can take advantage, also the BTO system has the advantage that there is no glut in inventory, and even though it might only cost 10 cents to make the chip (I dont know the actual cost) if it isnt being sold, the cost of holding the part in finished good inventory is more expensive to the company than the actual component cost. The co has to reserve capital to sit on a shelf waiting to be shipped. MU does that quite often, and it hurts them alot.
Plus if the firm holds alot of inventory in a industry like INTC, they lose money since chip prices naturally drop, yet they are holding excess capacity wastefully. And they make forcasts of Net Income based on selling the chips at higher prices. And when technology changes, a firm cant sell the old product. I am sure that INTC isnt really bad at this, but that is the cause for margins dissapearing.
With a BTO they make inventory more efficiently, dont hold it so long. BTO doesnt only mean Joe calls INTC asking to make him a chip, BTO is more of a JIT philosophy, with a twist. JIT is what INTC must not have.
I know that JIT is very rare, and difficult to put in place. A firm thinks that they have to keep production moving to be profitable, and I say that idealism is a margin killer.
Now my hands hurt..lol |
