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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (67882)	1/29/2001 3:25:05 PM
From: Doug	Read Replies (1) \| Respond to of 99985

Haim: You are right about Inventory of finished/raw materials as Companies have switched to JIT manufacture and outsourcing. However, the problem is still one of excess design capacity. This is borne out by the drop in prices and margins of many of the Tech/Telecom Companies. The margins in Tech goods have been steadily falling even though the products became more complex. To maintain profits they have had to increase volumes . That excersise has its limits. Margins never decrease when a seller has a captive market ; falling margins are early warning signs of excess capacity. The nearest analogy I can give you is the Cruise Ship Industry in the Recreation Sector. The number of people who have used Cruise ships has steadily increased and shows no signs of falling. However, the profits of the Cruise ships have fallen off only because there are too many of them. Its exactly the same in the high Tech world. I am hoping to see a wave of consolidations before a meaningful lift off.