To: Teri Skogerboe who wrote (15048 ) 1/26/1998 2:28:00 PM From: William L. Oppenheim Read Replies (1) | Respond to
Not just individuals will be reluctant to upgrade at the moment, but companies as well. Furthermore, a lot of the easy productivity gains are behind us. The automobile has been pretty well siliconized. There will further improvements of course but in percentage terms nothing like what we have seen over the past 5 years. In a sense, for this part of the chip market, if auto sales fall, so do chip sales. At some point we will simply replacing the vehicles that are being retired--no growth. Thus, the high PE ratios of these companies based in large on the PEG theory of high earnings per share growth rate will likewise begin to dissipate. Perhaps we are simply see some classic maturing of this particular business cycle. Although I've been unable to justify a new Pentium II for what I do, I note that Intel just released a version with .25 um wires that will be capable of 450HZ by the end of the year. They are practically telling me to wait. Till then, $120 in an uncertain environment for commodity like edo ram chips is a lot more palatable than $3000 for a machine that will be old in less than a year, according to the folks who are selling it to me. Given the choices among network folks--cable, copper, satellite, etc., a lot of them are probably waiting for the air to clear as well. Making the wrong choice here can be detrimental to the bottom line, while waiting for the clear choice can be very helpful. AMAT of course will there when the product cycles do turn up, and when the applications are written for the newer technology, so as a longer term choice, it still makes good sense to me.
