Monday, February 08, 2010

Piper Says Buy the Semis

Piper Jaffray semiconductor analyst Gus Richard makes some very valid points in his call to buy the semiconductor group.   I do think there is a trade here because the semi-stocks have come down so far.   Cross your fingers, knock on wood….   It’s another call on the market.

Your mileage will definitely vary (consider this a disclaimer of sorts).

The comments in the same report about Cisco's recent earnings release are very interesting.   I think one of the areas of concern with Cisco's report came to light when a few folks, folks that actually read quarterly filings, made note of the fact that they were providing some very cheap financing to some of their customers.   We’ll see how that works for them……  Suffice to say, history shows it hasn’t done well for others.

I don’t have a problem with the idea that we are on the brink, or in the midst, of a major electronics upgrade cycle.  Whether this cycle is driven by PCs, which I will broadly place in any form - game boxes, e-books, smartphones, etc, etc -  it is clear to me that we are taxing the telecosm and the attendant systems to the nth degree.   Basic things, like the delivery of electric power, are under duress.

Fact is, we have been under-investing for too long.

With the real “Infrastructure” situation I’ve been experiencing that degradation and lack of maintenance first hand.   The utility services here in the Dallas Metroplex, which I now choose to call, Baghdad, Texas, are absolutely horrible.    Sure, like everyone else we had major storms last week and one can almost justify three days with no power but this is not just a one-off occurrence.    Outages almost every other week are taking place!   It’s unreal.

Why is this happening?  Check these comments out from a few weeks ago:

Now, I knew there was a problem way back when I was living here full-time but I get the sense that it would be wise to go back and evaluate the situation one more time.   I am sure I have not given enough consideration to the politics and the cut-backs in this arena.   In the past, the things that have kept me on pins and needles is the deleterious effects to the stability of the grid that is sure to come about by radical changes and additions to its base Infrastructure as a result of “accelerated” spending on some parts of its “smart-grid” areas, compounded by the renewables that are coming online which will stress existing transmission lines in new and previously untested ways.   Add to this, the fact that transmission lines are not expanding in capacity half as fast, much less being built to where they are actually needed to meet expanded geographies and the requirements for the new loads (all that good stuff we love) due to NIMBY (not-in-my-back-yard) issues, and it becomes very, very clear we facing some major infrastructure challenges.

At the very same moment one read about campaigns that make you feel as though things are improving.   For example, here’s a PR about making the communications world more energy efficient:!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLd4x3tXDUL8h2VAQAURh_Yw!!?LMSG_CABINET=Docs_and_Resource_Ctr&LMSG_CONTENT_FILE=News_Releases_2010/News_Article_001908.xml

Alas, almost every piece of marketecture that I've seen coming from a major box vendor looking to save the Earth from itself has included some new box or an application, e.g., power over Ethernet, that burns additional energy while monitoring and controlling the power being used by other useless boxes designed to run on an architecture borne of some foregone, god-forsaken, copper-ridden era.  Translation, these solutions are the epitomization of setting the fox loose in the hen house.  Maybe AlaLu's solutions are different, we don't know yet.  If they are, however, they'll be the first major vendor to have fooled me on this score.

<big sigh>

When it gets right down to brass tacks I hope Gus and his bullish views are right.   One might as well enjoy today’s upward bias in business and hope for the best longer term.   It certainly beats a path in the other direction.

If you have an interest in reading the full report, drop me a note and I will mail it to your attention.

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