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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Michael Bakunin who wrote (53178)	3/23/1999 6:32:00 PM
From: Earlie	Read Replies (4) \| Respond to of 132070

JP and mb: As bearish as I am about the semi/PC sector, the deterioration evident from the waves of nasty warnings as well as commentary from the field, suggest that things may be coming unglued more rapidly than expected. The big problem is the "channel stuff that won't go away". Even last year's "stuff" pales by comparison and it was bad enough. CPQ has an inventory situation that is threatening to get out of hand. With "size" inventory both in house and in the channel, Compaq may be forced to "re-acquire" that which is floating aimlessly around in the channel (before it is unceremoniously shipped back to them, thus adding transportation and warehousing costs to an already losing situation). One can envision CPQ doing this, then taking a massive "one-time-only" restructuring charge. Meantime, what to do with the plants? A further build-for-inventory is possible, but unlikely. Sooner or later, the plant closings and lay-offs will appear. As was the case last year, CPQ has engendered solid industry-wide unhappiness among both its competitors and its clients. Not a bunch of happy campers to say the least. CPQ uses the consumer channel, resellers and direct sales to flog its products. A "new strategy" is supposedly being formulated. All involved are on edge. This situation is becoming messy. Before the New Year, a few analysts were talking about micro shortages at INTC. At the time I suggested that this was a concocted story. Whether that nonsense was believed or not, there sure as heck is a ton of product available now. None of the micro producers can sell their full production, the spot market pricing remains under pressure and unless PC sales pick up soon, a full-blown micro glut will be evident for all to see. Intel has cut prices brutally (to blunt AMD's market share theft) and has cannibalized its upper end products. The P3 remains a still-born joke. New, faster "Celerons" are being rushed to market. Margins do not remain unblemished from such activities. Intel may refrain from warning, but all this does is ensure that the Q1 numbers and Q2 "guidance" create abrupt unhappiness. Owning INTC puts sure makes sense to me. Incidentally, for those who choose to ignore the PC and micro inventories, check out the motherboard situation. Across the board (really bad pun), they are in "excess supply". Best, Earlie