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Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (125666)	10/11/2000 10:52:42 AM
From: Rob S.	Read Replies (1) \| Respond to of 1582193

You could be right. While some tech stocks have come down to "historical norms" for valuations, an increased pullback in growth forecasts could continue to cause them to drop. It is difficult to judge the extent of market softness at this point. While laggards such as Lucent and MOT have expectedly reported sales that are not keeping up with market trends, they continue to generalize this softness as industry weakness. The truth may be that much of the weakness in these particular companies is more due to their own mis-management of resources in the competitive environment. These laggards aren't keeping up as well with fast paced trends. But coming off of an exceptional growth period, there is real softness in demand for PCs. Growth of 25% last year is down to around 12%-15% this year. Some analysts expect PC sales to slow to single digits next year. On the other hand, server systems sales continue to grow at a brisk pace - fueled by the Internet. The high valuation tech stocks were priced to perfection such that any slowing down of growth toppled the high multiples. The valuation of these companies is highly leveraged on the growth factor. A 10% drop in sales and earnings growth can equate to a 30%-50% drop in the stock price (as we have seen so far). However, the market may now be judging the health of the industry based on the pre-announcements and early results of the weakest performers. Maybe things aren't as bad as they now seem.