I cannot disagree with your assessment. Everything is relative though. As bad and as manipulated as the semi secotr might be to you, it is a far cry from Wal-Mart on one side and AOL on the other side.
Manipulation of stocks is inherent in this market. There are very few value plays and when they do exist, they stagnate.
Just pulling a few stocks out of the air for an example.
LTR - hasn't really done much over the past few years but has traded in a wide range. Pays a pathetic dividend.
SO - good utility that pays a good dividend.
DELL - just as manipulated as other technology stocks but it has split once a year for the last few years.
Sara Lee - recently downgraded but is a major food conglomerate.
COMR - one of the better regional airlines.
Well, 5 is enough for the moment. Are we saying that the only investments are the large cap DOW stocks that we can all bank on? Or are we willing to accept the new market economy. As much as the markets revolved around oil, cars, energy and food in the past and going forward, we cannot help but accept that microelectronics has replaced the Industrial Revolution.
You really can't look in any direction without seeing the impact of microelectronics. It is our cars, in our PCs, in our phones, our TVs, VCRs, snic toothbrushes, alarm systems, sensors, medical devices, ATMs, and the list goes on. We all need to drive and eat and control the environment in our homes. However, more and more our economy has become electronic.
Bank by PC, Buy goods through the PC, Pay bills over the PC, do research over the internet, and this list goes on. this technolgical revolution we are in the center of is fueld by the ICs that are designed and manufactured. Too much emphasis is being placed on pure memory and not all of the other uses for ICs. With this said, there will always be a need for buidling new devices more cost effectively. This will mean new facilities and new equipment to meet the needs of the end users of this technology.
I can't help if young hot heads running funds today are manipulating these stocks and creating the volatility we are seeing. The market is a different animal these days. More and more, the on line traders with their NASDAQ level II execution systems are causing just as many manipulations as the institutions and funds. Traders are chasing fractions and causing as much volatility. Chasing a dream creates unwanted situations.
Furthermore, if you look at some of these "manipulated" stocks in the tech secotr, you will see that they are heavily institutionally held. Therein could be part of the problem to. With very liitle stock in the real float, volatility is worse. Suggesting that AMAT is not a good company is like telling me GM is also a dog. both go through cycles and the market determines the price and the price multiples.
MU is probably losing money and MU had a great deal of capital infusion from TXN and INTC. However, as I pointed out elsewhere, the price of MU has collpased recently. Don't you find it interesting that the TXN shares became freely tradeable on April 1st and TXN made comments that they had every intention of cashing in on those shares to recoup years worth of losses in the DRAM business. Even as MU fell in price, there was a great deal of profit built into those shares since they were acquired at lower prices. Could MU's problems be nothing more than TXN unloading their shares? Possibly. Could MU's worries be part of market anticipation of the margins that could be achieved with the RMBS RDRAMs only to have the rug pulled out by INTC recently?
Don't blame MU for falling DRAM prices. DRAM producers are a bunch of cutthroat bastards that do not understand simple economics. Why is it that the oil and auto companies seem to have a good deal of competition but still are able to make profits and to raise prices each year? Why do ICs become more complex but their ASPs drop. As least with Color TVs, the price stays the same but the complexity and functionality improves.
INTC can make profits with its chips and many of the ASIC producers turn out some good numbers. Specialty ICs (analog - DSPs - GaAs) command nice margins. Likewise, AMAT is able to produce do earnings with decent margins.
DRAMs are like grocery stores, they run on ever diminishing margins. However, the cost of putting up a store is much cheaper than building a wafer fab. the overheads are worlds apart. And unlike grocery stores, DRAM producers do not really make it up in volume. Shrinking the devices and increasing the wafer size are two major ways of countering these price pressures. One of the major costs built into the price of the device is depreciation of the costly assets used to make those devices. Whe you conisder it takes 13-21 months from start to finish, to build and ramp up a new facility, it is difficult to project margins and ASPs for the devices that will be processed. Sometimes, it is difficult to know which twchnology will be used at that place in time. We hope that enough forward planning does occur to ensure the finished fab is not obsolete prior to its completion and that costs are kept in line to maximize profits.
What I mean to say is that a defective mindset is being used in the DRAM sector much like the cheap PC sector. The business model may leave a great deal to be desired. If the DRAM producers could come to terms we would not have allof these dumping lawsuits and charges being filed. Working together or even forming cartels would be more logical approaches instead of trying to drive each other out of business only to jack up prices after running others out of the business. This is global lunacy.
Sorry, but it is just my opinion. It is easy to blame a specific industry or claim manipulation (which I do whine about at times) but we need to really look at the greed of certain people and, more importantly, recognize the fact that certain people are poor businessmen.
You only have to look at the shareholder "revolt" at this year's AMD annual meeting. 30 years of Jerry Sanders and he has yet to comprehend that he has the wrong people running his new Fab 25 in Austin Texas. The Texas facilities have had more manufacutring and process issues than any 2 fabs I have ever come across in my 20+ year career. Having worked with some of these people and having conversations with some of their suppliers, many of the people that control the fab there, from Engineers to managers are egotistical, arrogant, or self serving individuals that turn a deaf ear to the support and help being offered. Lack of perfromance at AMD is definitely people and attitude related and has little to do with big bad INTC causing margin issues for AMD. It is part of the problem but the real issue is wafer cost, yields, and cycle time of products being produced. This can be fixed.
The same is true for the DRAM wars. We live in an electronic age and there will always be a need for semiconductors, semiconductor equipment, and manufacturing facilities. Don't beat down an industry because young Harvard MBAs are trying to be the next Gordon Gecko or because institutions are playing price fixing games. Look at the accusations being made against Goldman today. And let's not forget the power of these internet threads. We have seen time and time again, people being fleeced in pump and dump scams by stock promoters, disgruntled employees, false reports, April Fool's Jokes, and a host of other things.
Sory for the diatribe but I was writing this message all day, in between market activities. Therefore, I have a tendency to ramble occasionally and then catch a breath only to come again<GG>.
Andrew |
