Wednesday, October 05, 2005

Upgrading to Interesting

Upgrading to Interesting What can I say? For those that visit this site you know that I have not posted anything about the electronics, chip or chip equipment industry for a while. I downgraded it to boring on 6/25 - which really meant "no further comments necessary" - and left the party (if you want to call it that) to enjoy the summer. Of course, that's not really true. I've been involved with the semiconductor industry for so long that it is literally impossible to attempt short a term break. I could not get away - no matter how hard I tried. Went on the annual trek to Semicon West in July, participated in a couple of mid-season forecasting sessions, spent hours on the phone talking and e-mailing with people who run businesses embedded up and down the manufacturing food chain. Some of those talks were with people outside of the electronics industry. Read a lot, learned a ton..... Please don't misinterpret the title of this post as a recommendation to buy the stocks. I'll get into the why of that question later. We've held the stocks for a long time, riding out the little ups and downs of the last few years. It would be hard to grade the trading action as interesting. I know, I know. I downgraded to boring and right after that share prices jumped out of the range and, in a measured way, ran to higher ground. Fundamentally things did not change. The capital equipment industry is enjoying a seasonal blip in tool orders. The semiconductor makers have been in their production ramp for the holiday selling season. A number of technology issues are testing the process technology front (as always). The supply chain continues to be stressed. I could go on and say, higher energy prices, higher interest rates, housing bubbles, and all that other jazz were also visible back in June. They were and in time, I suspect, they will develop into more significant issues for the end demand front. Let's leave that alone for now.... What I mean to imply when I say, "Upgrading to Interesting" is that there are a lot of signs that things are about to change on the business strategy front. That strategy change does not mean we are going to see a spike or bust in semiconductor and semiconductor equipment bookings and shipments. Remember, a seasonal move in order patterns should be expected. Even if it is just a bounce off this year's lows. Even if it carries into early next year. We see it coming. It's here right now. That's all short term. The longer term changes I see have to do with the speed and aggressiveness of companies as they adjust their business models to the dynamics of a mature industry state. A few months ago I would have said that electronics industry executives are being dragged, kicking and screaming, toward some hard decisions. Not anymore. The light bulbs are on. Encouragingly, I found during my talks with industry people over the summer that more and more are embracing and adapting to this change. More than anytime in the past. Simply put, that's why this period is now so interesting. There is actual movement and the one's that are moving are going to become the winners. It's sad that it took so long. Some of this stuff we have been talking about at this site for years. At the same time, it's good that we are now moving forward. Blogs are being updated today. Stick around. Carl

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