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

To: jim heger who wrote (1833)	10/13/1998 10:50:00 PM
From: kolo55	Read Replies (1) \| Respond to of 2542

Earnings reports out; Kent and Intel. Intel reported nice revenue gain after the close today. Coupled with the recent report by AMD, its apparent that the PC sector is seeing at least a temporary resurgence after the channel inventory reductions in the first half of the year. Kent also reported after the close, and released what I would charitably would call a "terrible report". They had weak revenues of $147.5M, down from $157.1M sequentially, and lost 13 cents per share when analysts expected a loss of 2 cents. This is worse than they warned. There are good reasons for Kent's losses. They serve primarily the PC sector and semiconductor-equipment companies, and both these sectors have been hammered. The PC sector has seen rapid drops in ASPs that has reduced revenue growth for companies like SCI and K*TEC (Kent's assembly subsidiary). The semi-equipment makers are experiencing one of their worst slowdowns ever. Also Kent has expanded and has idle capacity, and their new Mexican plant is just coming onstream. This company is sitting on almost $200M in cash, but also has $200M in LT debt. Here is an example of a company who didn't know how to develop and execute a good strategic plan. But with all that cash, this company could make a good takeover candidate. And the two sectors the company serves, are cyclical and eventually these sectors will turn. Personally, I think that the semi-equipment sector has a prolonged 'trough' in front of it though. But the stock price certainly has a lot of bad news factored in, so I wouldn't dare to guess what the stock does tomorrow. In any case, there might be some fallout in the ECM sector tomorrow. But its really another case of one of the domestic ECM companies underperforming the sector by a wide margin. I'm still looking ahead to Flextronic's report on Thursday. Paul