Michael,
As for the long term growth estimates, we shall see. :-)
As for the economy, I do not have the reference with me here, but if I remember correctly at the present growth rate the technology sector will become 50% of the US economy is 15-20 years or so. So, I think that 5 years is too short a time to predict a significant slowdown in the technology sector by virtue of proportions. And since we are talking the absolute growth here, if margins are squeezed at the same time that should mean a phenomenal increase in consumption which I posit is not likely.
As for individual segments within the sector, the box maker domain definitely looks vulnerable right now, but I suspect that AMD and CYRIX will drop out of the low-end CPU business soon. They cannot bleed for ever and need to get into the mid-level to make money. Then the unusual pricing pressure of the last two years (wrt the more traditional micro-processor deflation) will subside.
As for individual companies within this segment, some will do well and some won't, but my money is on DELL based on past management performance. And, DELL is also diversifying it's product line.
As for the discount rate of 6.5%, that may actually be too high. Remember that inflation is essentially a product of the 20th century and may turn out to be transient (call me a new-era believer if you will :-)). Given the amazing productivity gains that we have seen recently, a lower rate seems completely justified to me. Of course that is of no consequence, as what matters is AG's thoughts on this issue.
However it seems to me (from public documents and speeches) that AG doesn't consider the new-era logic to be completely baseless either.
-BGR. |
