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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: Nevin S. who wrote (2365)	6/28/2000 4:26:00 PM
From: rich evans	Read Replies (1) \| Respond to of 2542

Nevin, I think the comments by the Fund manager are wrong headed.There have been much analysis on this issue of margins and articles written by some and the correct way of looking at it I believe is as a ROIC which is quite good in the 30% range. In the other words there is a lot of material pass through so the value added by the EMS companies is the test. And the EMS companies have been adding the value added by going after design, repair,components, enclosures , systems integration etc and not just PCBA. With 60- 70% growth , they all will of course need capital to expand to meet this growth but they have been keeping there balance sheet ratios well in hand despite such growth. But of course they can not grow to the sky so some day the growth must slow which could cause a lowering of PE ratios from an average of about 37 for the top tier. But this day IMO is at least 5 years away although there will certainly be ups and downs along the way. The optical equipment segment though IMO creates questions . We may not need ATM switches and SONET gear in the future for example and how far are these photons going to penetrate the infrastructure and even the last mile and your home for that matter. For a good read on the issues check out: Message 13952328 Rich