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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Tom M who wrote (70521)	11/14/1999 10:01:00 AM
From: Giordano Bruno	Read Replies (1) \| Respond to of 132070

Investors piling into semiconductor shares may not know that many insiders at these companies are exiting. Insider filings take time to trickle in, but the selling now looks like a consensus, according to Bob Gabele, director of insider research at First Call/Thomson Financial. From mid-August to late September, for example, seven insiders at Applied Materials have sold 308,247 shares; two sold more than half their holdings. The sales are the biggest in any 30-day period since 1997. November 14, 1999 MARKET WATCH The Chip Stampede May Be Hitting a Wall ------------------------------------------------------------------------ Related Articles • The New York Times: Your Money Forum • Join a Discussion on Investing ------------------------------------------------------------------------ By GRETCHEN MORGENSON EW YORK -- The NASDAQ Composite Index is no longer simply a stock index; it's a phenomenon. The index is up an astonishing 46.9 percent this year; in 11 of the last 12 trading days, it has closed at record highs. Of the fuels propelling this rocket in recent weeks, none has been more potent than the semiconductor sector. Shares of companies that make chips for the world's computers and other electronic gear have surged on rising sales and higher chip prices. As a result, the Philadelphia Stock Exchange Semiconductor Index of 16 companies is up 18 percent since Nov. 1. For the year, it is up 87 percent. Hot does not begin to describe these stocks. Applied Materials, a semiconductor equipment maker, had sales in the past 12 months of roughly $4 billion. Its market value is 10 times that figure. The Altera Corp., a maker of integrated circuits, is trading at approximately 16 times its $772 million in sales over the past 12 months. To put this run-up in perspective, during other booms for semiconductor makers, the stocks rarely traded higher than two times their sales. What strikes some as peculiar about the current stampede into semiconductor shares is that worldwide sales of chips are expected to rise just 14 percent this year over last. Moreover, a multitude of computer manufacturers and resellers -- IBM and Inacom, to name one of each -- have recently warned that the outlook for their businesses in the fourth quarter and beyond looks worrisome. Why are investors paying as much as 90 times earnings for companies whose futures depend on orders from computer makers who are singing the blues? Those who study the semiconductor industry -- a very cyclical business -- say recent sales increases at many of these companies are a result of an extraordinary inventory buildup by computer makers in recent months. These companies placed unusually heavy orders for chips on fears that an earthquake in Taiwan would cut supplies and in anticipation of strong computer sales to customers eager to buy before 2000. If computer demand does not soak up this inventory in the current quarter -- and IBM's warning of a slow fourth quarter lends credibility to that fear -- the world will be awash in chips. Prices will fall again and so will the stocks. Fred Hickey, editor of the High-Tech Strategist newsletter, thinks that sales of computers are starting a downward spiral that will extend into next year: "We are going into a long period of decline in computer demand because buying has been accelerated in the past few years" mostly by fears of Year 2000 computer problems. He forecasts a crash in semiconductor orders. Investors piling into semiconductor shares may not know that many insiders at these companies are exiting. Insider filings take time to trickle in, but the selling now looks like a consensus, according to Bob Gabele, director of insider research at First Call/Thomson Financial. From mid-August to late September, for example, seven insiders at Applied Materials have sold 308,247 shares; two sold more than half their holdings. The sales are the biggest in any 30-day period since 1997. At the Sanmina Corp., a contract maker of circuit boards, five insiders sold almost 200,000 shares in August. One seller, a director, cut his position 94 percent. In his first sale since 1996, Eric Lidow, chairman of the International Rectifier Corp., a maker of semiconductors for the power industry, sold 30 percent of his position. "This tells me the shares in the group are probably ahead of themselves here," Gabele said. "The insiders all seem to think their shares have been bid up to unrealistic levels."

To: Tom M who wrote (70521)	11/14/1999 1:16:00 PM
From: Earlie	Read Replies (3) \| Respond to of 132070

Tom: Like you, I strongly encourage every S.I reader or participant to read Bill Parish's latest report. While there might be a minuscule point or two with which one might take issue, Bill's commentary is right on the mark. I got to know Bill earlier this year, when I published much of his severe criticism of Microsoft in my newsletter, after verifying independently the accuracy of his findings. At the time, we were digging into the massive size of the income being generated by several of the tech darlings through the sale of put options against their own stock, when we started to become aware of the fact that MSFT's balance sheet "didn't add up". Bill's work made it crystal clear as to what was going on. Bluntly, I initially could believe neither the staggering amount of cash being salted away by MSFT through this scam, nor that the U.S. government tax rules would allow such a dastardly scheme, but upon investigation, we found Bill's observations to be extremely accurate. As a result of The Tech Review's publishing of this material, Gretchen Morgensen wrote a hard-hitting article about it in the New York Times. Shortly thereafter, Gretchen and the paper were both subjected to considerable criticism and pressure from MSFT, but to their credit, both the paper and Gretchen stood their ground. Within days, I personally received a rather interesting call from a very high ranking official of MSFT, who proceeded to berate me with respect to the inaccuracy of both the N.Y. Times article as well as the contents of our commentary in the Tech Review. After listening to his tirade, I basically suggested that he go peruse the company's own 10-Q, from which the figures were acquired, and that he quit the bluster and bluff as it doesn't work with those who are independent. Like Bill, I have been digging rather diligently into MSFT's numbers. As one who has a reasonable degree of familiarity with them, I can verify that he is extremely accurate. I also want to publicly congratulate Bill for his courage in taking up this battle with the largest and most aggressive company in the U.S. I also admire him immensely for maintaining a polite and gentlemanly style in so doing. Having suffered my own share of arrows from companies that disliked accurate but less-than-flattering criticism of their accounting or business practices that I have published, I know intimately just how nasty their efforts to discredit or "dissuade" (or worse) one from such activity can be. Bluntly, it can get worse than nasty. Bill deserves much support for both unearthing a complete fraud and for having the courage to call it as it is. Best, Earlie

To: Tom M who wrote (70521)	11/14/1999 1:55:00 PM
From: Knighty Tin	Read Replies (3) \| Respond to of 132070

Tom, Wow, he is really sticking his neck out. That MSFT and many other cos. are scamming eps reports is not in doubt. Where I have a problem is that they are mostly doing it legally, so it is not really fraud. If you allow folks to get away with murder, you shouldn't be surprised when a number of corpses turn up. The various govts. and the accounting profession and brain-dead investors have legalized these scam-a-ramas. I think that is absurd, but it isn't fraud if it is legal.