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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Demosthenes who wrote (36133)	7/29/2000 12:03:27 AM
From: C_Johnson	Respond to of 70976

Hello D and Brian, I am going to address your questions in the same post. Hope you do not mind. On chip companies having problems meeting demand...... This is true on many fronts but there have also been some inventory buildups. Regarding buildups I tend to lean toward the Q2 hoarding thesis: They ordered everything they needed and when the parts came they didn't have all the components (tantalum capacitors for one) to finish the product so they ended up with excess inventory. Let's face it, the industry is much more diversified and it has penetrated many more markets than it had three or four years ago. I am with you on the build out of the internet and all of the other drivers for the industry. They are real. The industry is in much better shape than it was during the mid-90's when the PC was the key driver. The broadening of the end market has and will continue to tax the capacity that is available today. Of course, that does not mean that all chip companies will make money. You have to make the right product to survive in the market even if demand is good. More to the point and please forgive me for hedging here. I am going to hedge because the chip and chip equipment companies are simply not good at forecasting end demand for their products. They admit that forecasting is a weakness if you ask them. With that in mind I try to be very careful extrapolating conference call and press release comments into stock prices. For some reason the industry simply cannot get a grip on this part of their business. Today people are finding that business conditions can be great and the stocks will not respond. D pretty much stated as much his post: It was a great call and made me realize that the stock price has nothing to do with the reality of PRIA's biz. So true.... As far as the cycle is concerned, well, that depends on the economy. :-) Now that answer may seem simplistic but I think prices in the sector are coming down hard simply because Wall Street is worried about an economic slowdown. There are a few other flies in the ointment but an economic slowdown is one that does not bode well for the chip business. You've seen the change over the last few days - funds are buying the defensive issues. Traders are worried. Yes, Wall Street's economic gloominess could be misplaced. Then again, forecasters in the chip business have been wrong before too. Either way, Wall Street will rotate back into the sector. Partly for the reasons we discuss all too often - the buildout of the internet, new applications and all that other stuff. The valuations are much better now so I suspect you will begin to see some bargain hunting over the next few weeks. So, where are we in the cycle? Instead of saying what inning we are in I like to say we are in the "fat part" of this particular cycle. This is the part of the cycle where you see a big cash build at the really good companies. How long will it last? The 200mm fill-out kicked off things nicely and 300mm is really building some momentum. That tells me we'll have good action for some of the big players for quite a while. I feel pretty good about where the industry is with 300mm but wafer prices need to come down a lot to really get the ball rolling. That's going to take time. There are other little things that bother me but overall I feel pretty good about where the sector is today. Gotta pack now - Boston calls. Have a nice weekend. Carl

To: Demosthenes who wrote (36133)	7/29/2000 2:15:23 PM
From: Proud_Infidel	Respond to of 70976

Parts shortages, ad costs hit Sony earnings yahoo.cnet.com Parts including electronic capacitors, liquid crystal displays and flash-memory chips have run short because of faster-than-expected demand for cellular phones and other consumer electronics. Sony said the situation is worsening and will affect sales and operating profit for the rest of the year. "We have a lack of microchip inventory, and we do not know when there will be enough supply," said Masayoshi Morimoto, Sony's corporate senior executive vice president. "We have to take into account possible loss of sales opportunities" through March 2001.