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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (7066)	11/24/2002 11:27:02 AM
From: Return to Sender	Read Replies (2) \| Respond to of 95530

SNIP from Asian Investor Online: On better note Taiwan Semiconductor, the biggest foundry in the world said an anticipated -7% drop in demand had not materialized and they were adding capacity to accommodate a brisk increase in orders for PC products. Did anybody pickup on that? The expected drop in demand did not appear and capacity utilization was increasing due to orders for computer products. This is not a small side sector manufacturer. This is the largest chip foundry in the world. This good news offset the negative semiconductor book-to-bill report from Thursday night. That ratio dropped to .73 from .84 the prior month. This was the fourth month of significant decline and indicated there was no recovery in the chip sector in October. This is the STEEPEST three-month decline on record and orders are approaching the lows from last year. It is not expected to get better soon. AMAT said they expected orders in Q4 to drop another -20%. This is directly contrary to the comments from Taiwan Semi today. However, the B-t-B ratio is backward looking and is for October. The TSM data is for the current month and to some extent is forward looking since they are having to add capacity for current order flow. This brings up the distinct possibility that the October period was the bottom and as the largest foundry in the world and the most likely to see the first swell of orders, the TSM data could be the leading indicator of a coming rebound. According to the latest CIO Magazine Tech poll in October, more CIOs expected to decrease spending in the current quarter than increase spending. This was the first time in eight months the sentiment was negative. If something has suddenly appeared to turn the economy around then it is a stealth attack and it appeared in the last four weeks. Maybe the Fed has decided cutting rates is not working and just decided to replace all the government computers instead. There are mixed messages coming out of the box makers. Dell gave a glowing outlook for its own business but was criticized for not being even more aggressive. HPQ beat estimates and affirmed guidance for the 4Q and were criticized for "possible" channel stuffing and number manipulation. It appears the bears have taken over the analyst community but then bad news always sells more newspapers than good. Dan Niles has gone on record several times recently as saying a rebound was underway and even called the HPQ surprise in advance. Both Dell and HPQ showed gains in Europe of +15% so obviously there was plenty of market share for both. Other areas strong for both companies and for IBM was the server market. All showed gains and Dell was knocking the cover off the ball. If companies are quietly using their IT budget dollars to beef up their server farms then the next wave will be desktop computers. You don't upgrade the desktops and then try to feed them with servers that are multiple generations old. You do the infrastructure first and then the individual computers. Another problem in the computer sector is price deflation. In 1999 the average 400MHZ desktop replacement for the Y2K upgrade was $2,500. The average 2.4 MHZ desktop replacement today costs less than $1,000 without a monitor. Today I installed a 2.4GHZ, 1GB ram, 360GB of disk, CD burner, DVD player plus all the bells and whistles and it cost me less than $900 using an existing monitor. PC box makers are faced with trying to produce revenue growth while computer prices are falling 10%-15% per month. In order to get +15% growth they have to sell +30% more boxes than they did the prior period. Just selling the same number of units would cut their revenue by -15% every quarter. It is a cutthroat market and it is not expected to see any sudden price surges. The fact that HPQ and Dell are showing revenue growth at all in the current economy is amazing. Obviously investors have not picked up on this fact of life as Dell stock has dropped -10% since they announced earnings one week ago. Now, back to the TSM news. I don't want to apply too much to the event just in case it is a blip and not the start of a new trend. If you remember a month ago I reported that they also said they were seeing a flurry of last minute rush orders to fill holiday shipments. So consider this. In October they say they have a flurry of unexpected orders. In November the expected drop did not appear and they are having to add capacity for December. This is normally a slow period for chipmakers with forced plant closings and mandatory holiday vacations. Do you see the possible conclusions here? Rising demand during a normally slow period. It could be a blip, just an inventory replenishment phase, but it could also be the real thing. The Fed has cut rates 12 times in two years and cheap money may finally be doing its job. asianinvestoronline.com Click on the link for the entire article. RtS