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.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Clarksterh who wrote (17330)	3/8/1998 10:56:00 AM
From: Fred Levine	Respond to of 70976

Altho PC profits affect AMAT, there is , IMO, a substantial cushion. By fiercely price competing, more units will be sold, albeit at a lower profit margin. It has been stated on this thread that the equipment buyers are more concerned with productivity than the price of the equipment. More pressure will be on the PC producers to increase productivity. When I see the absolute numbers of PCs decrease, I'll be more alarmed than with their margins. I also suspect that Compacts loss was Hewlitt Packard's gain. However, SEA, is hurting business, but unless they cut elsewhere and upgrade, their semi businesses will be hurt. I posted a rumor I heard on Bloomberg, that Intel was going to invest in Samsung, but have not heard more. In addition, more uses for chips are coming. Once again, things are not good, but I don't see a one-to-one comparison with the PC manufacturers. still long for the long term -- fred

To: Clarksterh who wrote (17330)	3/8/1998 2:09:00 PM
From: akidron	Read Replies (2) \| Respond to of 70976

Clark... I want to make it clear that i do see new uses for chips... and that I think the tech sector is the place to be... having got that off my chest... as dinner in a legendary parisian brasserie calls... I'll answer u keeping it short and sweet.... mobile phones are a bad example because margins are non-existant as they are increasingly given away... i really can't get into it in deatail but i have been in meeting in which the stratergy for set stop boxes was discussed... and they are mot looking for an continually upgradable product but one that has a five to seven year shelf life... also profit margins will be thin because TCI is afraid that sticker shock will delay aceptance of the digital service... most other aplication uses specialist low volume chips or old tecg cips that will surfice as this is how to bring to the market $99 kiddie laptops such asd the one's vteck sells... therefore IMO the chip market is almost soley dependent on the computer market for growth in the next two to three years.. and here lies the problem... Dell has a model that works, as the others have to supply dealers their margins are simply not as good, therefore they have been looking to cut corners and save cosdts... this is why Dell ship with intel inside, whereas CPQ ships a huge amount of K6's at the low end... the problem isb that to undercut intel cyrex and amd have reduced price below cost and they therefore are hemoraging... what makes it all the worse is that to clear channels of old crap CPQ is going to have to discount and the $750 computer will fast become a reality... a $750 computer is unsustainable at the retail level as CPQ get only $450 to $550 for it... the rest goes to the dealer etc, so they then have to go back to the chipmakers to get better prices... of course this will eventually be sorted out by the market, which will force the marginal players to get new day jobs... but not before a great deal of pain has been inflicted on our beloved amat... what make this scenario worse is that I belive that Microsoft is going to have to delay window's 98 for quiye a while because everything it is designed to do will cause the justice department to squeal... it efortlessly intergrates the os and microsoft product like word, excel etc with explorer n its current form.... hey it ugly but that's how I see it... I wouldn't buy CPQ above 20, and maybe not even then... AMAT should trade below 28 and perhaps 25, 20x 98 is IMO expensive given the medium term risks... noe for a nice bottle of sancerre, and some confit canard.... sorry about the grammer but you'll get the jist