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

To: jeffbas who wrote (1553)	6/5/1998 2:26:00 PM
From: kolo55	Read Replies (1) \| Respond to of 2542

Looks like SCI upgrade is pushing ECM assemblers up today. With SCI up over 2 points, JBL is up 2, and SLR is up over a point. This is in spite of DII Group's announcement. I'm not too surprised by DII's announcement, given the rapid slowdown in the board maker's business lately. This time is really showing how the assembler's are benefiting from the outsourcing trend. Solectron and Jabil have admitted to slight slowdowns in the MayQ, but both have picked up major new outsourcing deals. When they report on June 15 and June 16, the question is whether the near term (next 90 days) worries and influences investors more, than the forward looking guidance by these companies for next fall when these huge new deals really kick in. Jabil's acquisition of HP's laserjet plants will close in August. So the first quarter of Jabil's fiscal year starting September 1st, will be the first quarter showing the significance of the new laserjet revenue stream. There are also a lot of rumors that a large Dell contract will also commence in September. But in the MayQ report, there may be some weakness due to a slowdown in Quantum DLT work. In the JulQ report, there may be some slack capacity due to end of life on a much smaller HP program, there may be some slack as they free up capacity in preparation for the Dell work, and the street seems worried about a slowdown in 3Com work. And of course there will be the inevitable one time charges connected to the HP acquisition. It will be interesting to see if the the really short term dominates investment decisions or the 6-12 month horizon. Recently its apparent the street has a focal length of 3 months, and can't seem to focus on anything beyond that. My guess is that the ECM assemblers may have bottomed yesterday, and if they didn't, they will build the bottom between now and the SLR and JBL earnings reports. This is very similar to what happened early last December, when most of these stocks were 10-20% lower than today. The big question is whether the street looks more at the numbers or the forward looking guidance. I still expect the best earnings reports will come from FLEXF in the next three reports (JunQ, SepQ, and DecQ), and the street seems to see the same thing (for once!!). I have some posts on that thread why the next three quarters will be great. Of course, as I have recently posted on the Flextronics thread, the only constant in this sector seems to be volatility. Who would think that a business sector with such steady long term growth prospects, would have stocks that move 30-50% every 45-90 days? Paul