I really hate to keep drawing parallels to the DRAM market, but there are some similarities.
No one argues that DRAMS are commodities. Yet, MU's margins and earnings were firm in 1994-1995. It's simple supply and demand--PC sales were so strong, that the commodity DRAM industry felt no pricing pressures.
USRX has been enjoying similar markets for modems--right now, PC sales are strong, and while there isn't a tight supply on modems, profit margins have held firm because demand is still strong, and no one has really done anything to instigate a price war. If or when that demand weakens, or if a serious price war is sparked, USRX and their margins will suffer. The market has been anticipating this since last summer. Since then, the market has been wrong. But t might just be a matter of time....
RE: Higher-End products.....Growth and profit margins are going to trend lower over the next year (this is natural, and nothing to worry about). However, as the tight supply eases, the threat of a price war becomes very real. |
