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Technology Stocks : HDCO - Why sudden dip? -- Ignore unavailable to you. Want to Upgrade?

To: rich evans who wrote (536)	1/13/1999 9:29:00 PM
From: kolo55	Respond to of 572

I sold half my position above 40. And today bought it back, and then some. I couldn't see why the downgrade should cause a 5 point decline. Of course, I didn't have access to Dunne's reasoning when I made the trade; things moved a bit quick this morning, and again on the drop near the close. (To put things in perspective though, my HDCO position is one tenth the size of my combined FLEX and JBL positions). HDCO seems to be a good trading stock, with fairly frequent multipoint moves, and it gave me something to be busy with today, and avoid getting caught up in the market fervor. Last night Intel announced terrific chip volume, selling over 30 million microprocessors in the DecQ. This is a 120 million run rate. AMD, NSM, and Motorola(Apple i-Mac) are seeing increasing volumes as well. This certainly means most forecasts for PC sales will be raised for 1999. Couple this with surging volumes in telecom and networking, and my guess is that Hadco will see capacity utilizations increase, and should mean better margins. Regarding the IBM portable computer biz; I'm assuming Solectron goes to their decentralized computer assembly model they deleveloped with Ingram Micro. If the boards are acquired from Multek's Austin plant, and most board assembly done there for the NA market, then perhaps Multek will see increased board volumes in Austin. However, in the last conference call, Multek said they were picking up different customers in Austin, and that IBM's share would drop in upcoming quarters. I don't think this is a big factor, but since I still own DIIG shares, I don't care. The big factor is that Solectron contributes 18% of Hadco revenues (their largest customer) and Solectron is growing phenomenallly. They are raising $1B to fund expansions, and they had a ton of cash already. You add everything up, and 1999 has to be a much better year for Hadco. And if capacity utilization improves, then margins should improve. Hadco is selling at about 50% of revenues, and historically this has been a good price to buy board manufacturers. I am just playing this for a 30% pop to a more normal PSR. Paul