On CapEx ...
FROM THE RELEASE:
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TI Reports Fourth-Quarter and Year-End 1998 ....
DSP Grows 29% in 1998 .... TI Expects Sequential Revenue Growth in 1Q99 ... TI's capital expenditures for 1999 are forecast to be level with 1998 at $1.0 billion. R&D is expected to be $1.1 billion, versus $1.2 billion in 1998. Depreciation for 1999 is expected to be$1.0 billion.
"TI is well-positioned to capitalize on changing market conditions and to make the investments necessary for growth and ongoing innovation," said Engibous.
"We have already made investments in brick and mortar and can add equipment quickly when market demands dictate."
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I have not talked to TXN, but I would assume that their Equipment CapEx would be more heavily weighted to equipment.
Is 1999 going to be a blockbuster? No, not from the information we have thus far. Is it going to be better than 1998? Yes, it should be -- barring a collapse in the world markets.
Are these Equipment CapEx budgets cast in stone? No, as we witnessed last year, the manufacturers can always defer spending for some time. Conversely, these budgets can also be pulled-in, especially if "[the manufacturers] have already made investments in brick and mortar and can add equipment quickly when market demands dictate."
I have seen some pretty positive datapoints thus far in 1999 (PRIA seeing increased activity, Mr. Grim Bagley making "positive comments," TER as a leading indicator, INTC/TXN with reasonable numbers, Taiwan back in the game, MU spending [albeit, spending others' money], AMD spending in Dresden, ...). These indicators may not be stellar relative to 1995, but they are far better than 1998 ... and, I think you would agree with this: these manufacturers can only defer spending for so long -- if they want to stay in their respective games.
Ultimately, these down years and flat years will be followed by some strong years ... is this fully discounted by the market? That would be a pretty subjective call based upon your assumptions and (more importantly) your time horizon.
--Duker
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