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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 218.17+4.5%3:40 PM EST
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To: Mason Barge who wrote (6929)9/17/1998 9:08:00 PM
From: David Rosenthal  Read Replies (2) of 10921
 
Mason,

Tell me this: do you think the chip industry is dead, or in a lull?

Of course not dead. However a case can be made that recovery is far off. Overcapacity is widespread as Ian has pointed out. We also know that some of the efficiencies being applied are increasing capacity in already saturated markets. Therefore, even with fab closures, I think that the supply part of the equation will not decrease significantly unless things remain bad enough to literally drive more players out of business.

As far as demand it looks like it is weak in two of the major drivers telecom and computers (I know that computers were supposed to be suffering from an inventory correction that is over but someone is going to have to show me evidence of reviving demand in addition to Intel. So far the contract manufacturers are still hungry and this indicates to me that things are still sluggish). Since many parts of the world are in recession this cannot help demand. If things are unsettled in the US then businesses and families may hunker down and decide to do without new toys.

So supply and demand may remain out of balance for a while. It may really take dead companies and not just bloody stock prices before things start to balance again. If six months from now visibility is still nil then todays prices may look pretty inflated.

Of course for all I know things are picking up right now and it hasn't filtered into the news yet and that is why the more knowledgeable Street is purchasing. I would love to see more confirmation of business activity picking up. It would make it easier to call this a firm and final bottom.

Dave
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