Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector -- Ignore unavailable to you. Want to Upgrade?

To: kolo55 who wrote (1017)	12/22/1997 1:03:00 AM
From: patroller	Read Replies (2) \| Respond to of 2542

Paul and to all check this! Asia crisis won't hurt major EMS players Jim Savage; BT Alex. Brown Inc. It has been said that on Wall Street there is a constant struggle between fear and greed. Throughout the years of the now-geriatric bull market, greed drove stock prices, and many companies saw their market value multiply beyond reason. However, in the weeks since the onset of the pan-Asian financial crisis, fear has been in the ascendant. While the broader stock market has suffered increasing volatility and uncertainty, as well as a modest overall decline as a result of Asian currency devaluations, credit squeezes, brokerage collapses, IMF bailouts, indications of overcapacity, and potential deflation, the technology sector has declined by approximately 10% and the electronics manufacturing services (EMS) industry has seen an even more precipitous decline. As of the Tuesday before Thanksgiving, our index of EMS stocks was down 18% since the beginning of October, while the Dow was down 3% and the Nasdaq 6% Every day I receive calls from frightened investors asking what degree of exposure do leading EMS companies have in Asia. It is important in this context to separate myth from reality. In recent weeks, earnings shortfalls have been reported by several contract electronics manufacturers (CEMs), but these have been concentrated among small and mid-tier domestic companies. What is the real impact of Asia's upheaval on U.S.-headquartered CEMs? In our opinion, U.S.-based CEMs with substantial manufacturing operations in Malaysia and Thailand, including DII Group Inc., International Manufacturing Services Inc., Jabil Circuits Inc., SCI Systems Inc., and Solectron Corp., should experience a moderate net benefit. They should see lower manufacturing costs (including direct labor and overhead) as a result of Asian currency devaluations. In addition, because they are paid in U.S. dollars and have a dollar-denominated capital base, they could potentially gain share at the expense of local Southeast Asian CEMs, which could find their growth constrained by interest-rate volatility and uncertain liquidity. OEMs looking for stable sources of production in Asia may increasingly look to dollar-denominated companies as safer partners. What are the risks? First, it is important to note that Asian end-market weakness is not a major risk. Every U.S. CEM in Asia manufactures primarily for export to the United States and Europe. North American demand remains robust, and major European markets appear to be recovering from a long recession. The bigger issues are those that affect the broader technology market and the global economy. What impact does Asia have on overall global demand? What is the potential impact of softening global demand on OEM manufacturing strategy? What will be the impact of competitive devaluations on ASPs? Of these questions, only the one regarding OEM strategy should affect CEMs more than the general market. And our expectation - that OEMs will continue to outsource an increasing percentage of their manufacturing requirements - has not changed. So in separating myth from reality, perhaps it is time once again for greed to take over. The nearly 20% decline in share prices of leading global EMS companies is unjustified by fundamentals. Growth remains on track. And we remain, even in the face of a bearish wind from the East, unrepentant bulls. Copyright (c) 1997 CMP Media Inc.

To: kolo55 who wrote (1017)	12/23/1997 9:19:00 AM
From: Creditman	Read Replies (1) \| Respond to of 2542

See the stellar results turned in by Park today? Their customers must be doing pretty well, don't you think?

To: kolo55 who wrote (1017)	12/27/1997 7:39:00 AM
From: Creditman	Read Replies (2) \| Respond to of 2542

Super Barron's article re ECMs mentions DIIG, SLR, SANM, JBIL, Flextronics et al ... Very positive, downplays impact of Asia (as we already knew!) and says growth potential is "huge". Check it out! The cover article is about Allied Signal; mentions their electronic materials business and possible acquisition of Morton Int'l. In case you do not know, Allied is big in our industry making laminate, selling copper in conjunction with Mitsuii. Morton makes "solder masks" and other film related products used in board manufacturing.