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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (8619)	10/2/2000 7:06:48 AM
From: The Ox	Read Replies (1) \| Respond to of 10921

PC Demand Sending Mixed Signals NEW YORK, Sept 30 (123Jump via COMTEX) - Semi stocks are in a funk these days, especially after Intel Corp.'s (NASDAQ:INTC) announcement that it would miss its quarterly numbers. The SOX Semiconductor Index has been in a trading range of 900 to 1280 for the last six months and has been on a slide since the beginning of this month. It has hovered around that level the last few sessions. One of the things weighing on the industry is concern over the possiblity of a near-term slowdown in semi equipment purchases. The book-to-bill ratio for August came in at 1.24, up slightly from 1.23 in July but down from 1.46 in March. Nevertheless, executives at equipment companies continue to be bullish about their prospects. But the market is jittery. It is not easy to talk about the prospects of a semi manufacturer in this environment, especially if the manufacturer happens to produce DRAM memory. Yes, you guessed it. We are talking about Micron Technology (NYSE:MU), the No. 3 producer of DRAM memory behind Korea's Samsung Electronics and Hyundai Electronics. In 1999, they each held 14.4%, 20.7% and 19.3% of the $20.4-billion market, respectively. Micron's stock has declined approximately 44% this month alone and is down about 53% from its 52-week high. Volume accelerated as this sell-off occurred, never a good sign. Several factors have played a part. First, the stock is moving in sympathy with the SOX. Second, concerns are mounting that PC demand is weakening, as Intel's warning last week was followed by an earnings warning from Apple Computer (NASDAQ:AAPL) on Thursday. Third, investors are worried that DRAM prices are softening. Some of these concerns are valid, but they may be overstated a bit. There is no question back-to-school PC demand was weaker than expected, but signals are also mixed as to the extent of potential damage to box makers' financial performance. Intel squarely laid the blame on Europe, while Compaq Computer (NYSE:CPQ), Dell Computer (NASDAQ:DELL) and Hewlett Packard (NYSE:HWP) said they were witnessing no problems in Europe, or anywhere else for that matter. Apple, along with SCI Systems (NYSE:SCI) who also issued an earnings warning, said demand was weaker across the board. Europe remains a concern, but the industry should be able to witness the usual end-of-the-year pick-up in sales. On to the DRAM pricing issue. Lately, prices for 64-megabit DRAMs have weakened on the spot market. They have declined from over $8.50 in mid-July to below $7 now. It is important to remember, however, that this drop was not a result of weak demand but of inventory selling by PC OEMs. It is also important to note that contract prices for 64-megabit DRAMs are both stable and higher than spot. Understandably, OEMs, such as box makers, tend to enter into long-term contracts with DRAM vendors. So from a DRAM manufacturer standpoint, contract price is a better indicator of business. Micron, for instance, sells over 95% of its DRAM production in contracts. Also worth remembering is the fact that demand for 64- and 128-megabit DRAMs are at a crossover point, with 128-megabits leading the charge. Prices for 128-megabit DRAMs are more stable. With that said, it should be clarified that semis historically go through the boom-bust cycle, primarily a result of overproduction and inventory glut. Lately, DRAM vendors have ratcheted up production of DRAM. Just the other day Elpida Memory, a joint venture of Japan's NEC and Hitachi, announced that next spring it plans to start mass-producing 256-megabit DRAM to become the No. 1 supplier of DRAM chips. In 1999, it held the No. 4 position with 13.6% share. There is not yet a risk of oversupply because, over the past several years, the industry shied away from investing in new plants and equipment due to rock-bottom DRAM prices. Keep in mind, though, Micron stock will track closely with the SOX, which is not behaving nicely. After the dust clears, which analysts think will happen when the earnings season begins in earnest in October, Micron may attract bottom-fishers interested in the ride.