Friday, April 03, 2009

No Surprise: MKSI Pre-Announces

Subsystem component supplier MKS (Nasdaq: MKSI) pre-announced earnings for the quarter. No real surprises here. That said, I'll make a few comments.....

Conversations with a few industry friends have mentioned an interesting pattern. Here are some from a veteran of the business:

Smaller equipment orders, stuff at/under $50k, are getting pushed out or cancelled altogether. Visibility, it appears, is still a pipe dream. Many companies are still struggling with how to maximize cash conservation programs. Clearly the objective is to stretch reserves to a point where operations can be funded through CY'10. It is disconcerting to hear Sr. Execs discuss the possibility of this extending more than than 6 quarters into the future. This is a point that is driven home by yet another 20% RIF - a RIF initated by a management team that is held in very high regard.

For the time being it is apparent that the device companies are the only restock plays. While this is a good thing I believe those that are investing at current valuations are being pushed by the action in the market vs. a significant and lasting improvement in fundamentals. Access to reasonable indicators is important. With nice gains in two it is best to be disciplined and committed to move quickly if the market turns. Many analysts, even though they have "BUY" ratings on certain stocks, are very bearish on their conclusions. Much of this hinges around the weak state of end demand.

Good stuff from the insiders. Take it to heart.

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