Rising Inventories Worry Tech Investors Again
Bad memories of the technology-stock meltdown in 2000 have been flooding the thoughts of some investors lately and it has a lot to do with a few worrisome signs that inventory levels are rising at some high-tech companies.
For some investors, the mere mention of an inventory buildup is enough to trigger an unpleasant association with fall 2000. That was when inventory questions surrounding chip companies touched off a plunge in those stocks amid a broader collapse in the technology sector.
So when J.P. Morgan analyst Chris Danely downgraded the semiconductor group a few weeks back, some investors were instantly reminded of a similar downgrade of semiconductor stocks in July 2000 by John Joseph, now director of research at Smith Barney. Back then, Mr. Joseph, who was a semiconductor analyst at the time, saw a troubling buildup in inventory. Not long after his downgrade, semiconductor stocks, which were among the last holdouts when tech stocks collapsed, began their own free fall.
Investors now are asking whether a similar fate awaits semiconductor and other tech stocks as signs that inventories are creeping higher have mounted. In his March 1 downgrade, Mr. Danely wrote, "We believe investors should adopt a more cautious stance as momentum/fundamentals appear to be peaking."
Some investors even believe the worries about inventories in the tech sector are contributing to the stock market's overall weakness in recent weeks, as shareholders fret that the economic turnaround isn't developing as expected.
Robert Bowman, a technology analyst at J.P. Morgan Fleming Asset Management, says some seasonally weak results at a few semiconductor companies and "a little bit extra inventory" in laptop computers have triggered "fears and reminders" of the tech-stock meltdown.
But Mr. Bowman isn't buying the story that inventories are unusually high, and is urging portfolio managers at J.P. Morgan Fleming to add to their positions if chip stocks continue to decline. Certainly, inventory buildups in the tech sector, particularly at this time of year, are nothing new. And the chain of events that led to the recent buildup in inventory is a familiar one to tech investors.
This go-round, inventories rose after a surge in demand at the end of last year took some vendors by surprise. Some components -- such as the "flash memory" used in digital cameras and video recorders -- were in short supply at year end. Meanwhile, "lead times," meaning the time it takes for a vendor to get delivery on a component, stretched out in many cases, investors and analysts say.
Anticipating a strong recovery in the second half of 2004, technology vendors such as Cisco Systems ramped up their orders to contract manufacturers at the end of last year, hoping to improve the availability of components when the expected improvement in business materialized later this year, analysts say.
Now, however, investors are spooked because warning signs are cropping up that vendors may have overdone all the heavy ordering at the end of the year. Investors are watching for signs that demand, in both the corporate and retail markets, is weakening. The worry is that vendors and suppliers alike will suffer a hiccup in their results as they work off excess inventory. Investors are troubled by the notion that an inventory buildup has materialized so early in the expected recovery phase of the tech cycle.
Evidence is popping up across the tech sector of building inventories and the ripple effects have hit tech stocks. At the top of the list are contract manufacturers who assemble and supply components to big vendors such as Cisco and Hewlett-Packard. Many of these companies have reported that lead times are growing shorter on some parts, a sign that they may be working off an oversupply of inventory in some areas. The next step, investors fret, is that the contract manufacturers will, in turn, reduce orders to semiconductor companies.
Among the contract manufacturers whose shares have been hit are Jabil Circuit, Celestica Inc., Solectron and Sanmina-SCI Corp., all of which jumped at the beginning of the year but have been on a steady decline since mid-January. Sanmina, for one, is down about 26% from its $15 price in January, closing Friday at $11.01, while Solectron is down 33% from around $8 in mid-January at $5.31. Jabil is down 10% from $32 in January at $28.80.
The contract manufacturers haven't said which vendors are cutting back orders but traders have gotten wind of talk that Cisco is among those paring back. For the record, Cisco declines to comment. But Cisco's chief executive, John Chambers, helped to fuel such speculation during a conference call in early February, when he told investors that corporate executives are more cautious about spending these days "than you would normally see at this phase of an economic recovery."
Investors were hoping for better news, says Fred Hickey, who publishes a tech newsletter, High Tech Strategist. "It wasn't as strong a statement about demand as the market wanted to hear," he says. Coupled with the fact that Cisco admitted on the same call that its book-to-bill ratio, or the ratio of orders to shipments, was down for the quarter, investors began to fret that "something may not be right," he says. Cisco's shares have fallen about 20% since mid-January to around $23.40 currently.
Investors also point to signs of a buildup of cellular-phone inventory at wireless carriers. Inventories at Cingular, for instance, more than doubled at the end of last year, compared with the year before, after an anticipated replacement cycle wasn't strong enough to absorb a buildup in inventory. Cingular, which is a joint venture of SBC Communications Inc. and BellSouth Corp., has brought its inventory levels down by 23% in the first two months of this year, a spokesman says. He adds that the inventory buildup isn't so large when viewed in the context of a more than 85% increase in sales during the fourth quarter.
Intel's share price is down about 24% from January, when fears about inventories and the strength of the recovery began crystallizing. Intel's shares have been hit by several worries. Mr. Danely, in his March 1 note to clients downgrading the semiconductor group, pointed to the idea that lead times have peaked at component suppliers, as well as a peak in year-over-year revenue growth. Historically, a slowdown in the revenue growth rate, when compared with the growth rate of the year before, has correlated to a decline in the group, analysts and investors say.
Even notoriously bearish market watchers such as Mr. Hickey say they aren't ready to run for the hills just yet. "What is different between now and 2000-2001 is we haven't seen demand collapse," says Mr. Hickey. "It's not unusual to have an inventory buildup and if demand holds up it gets flushed out," he says.
As the debate about inventory has grown louder, one analyst, Clark Westmont, of Citigroup, in a fit of dramatic writing, says: "It feels as though the fate of the chip cycle is in the hands of two small hobbits. The ring they carry is called 'Inventory Correction,' which can only be destroyed in the fires of accelerating hardware demand," he wrote in a March 21 note to clients. "Theirs is an epic quest whose progress is watched by an audience perched on the edge of their seats."
科技股投资者担心噩梦重现
科技股2000年陨落的悲惨记忆近来一直回旋在部分投资者的脑海中，这很大程度上是因为一些令人不安的迹象显示，部分高科技公司的库存水平不断上升。
对一些投资者来说，单单提及库存增长就足以让他们想起2000年秋天那段不愉快的日子。当时，在科技股全线崩盘的过程中，围绕晶片公司的库存问题也触发了这些股票的大幅下挫。
因此，当几周前JP摩根(J.P. Morgan)分析师克莱斯?邓利(Chris Danely)下调半导体类股评级时，一些投资者随即联想到了现任美邦(Smith Barney)研究主管约翰?约瑟夫(John Joseph)于2000年7月的同一举动。当时担任半导体业分析师的约瑟夫发现，该行业出现令人担忧的库存增长迹象。他下调评级后不久，在科技股崩盘之际一直坚守阵地的半导体类股便开始一泻千里。 投资者目前不清楚，在显示库存上升的迹象不断涌现的形势下，等待半导体和其他科技股的是否会是同样的命运。邓利在3月1日下调半导体类股评级时写道，"随著动能／基本面因素达到顶峰，我们认为投资者应当采取更谨慎的立场。"
一些投资者甚至认为，对科技股库存状况的担忧是导致最近几周股市总体疲软的原因所在，因为股东感到经济复苏的进程不尽人意。
J.P. Morgan Fleming Asset Management的科技业分析师罗伯特?葆曼(Robert Bowman)表示，部分半导体公司业绩出现季节性疲软和笔记本电脑略显过多的库存引发了人们对科技股崩盘的恐慌和回忆。
但是，葆曼并不相信，眼下的库存达到了超乎寻常的水平。他敦促J.P. Morgan Fleming的投资组合经理，如果晶片类股继续下跌，则增持头寸。当然，科技行业库存增长（特别是在一年里的这段时间）并不是什么新鲜事。另外，导致近来库存增长的诸多因素已为科技投资者所熟知。
去年末需求攀升之后库存出现增长令一些销售商大感意外。一些电子元件（如用于数码相机和录像机的闪存）年底时还供不应求。同时，投资者和分析师称，很多时候交货周期都有所延长。 因预计2004年下半年经济强劲复苏，思科系统(Cisco Systems)等科技产品销售商在去年年底纷纷增加了对合约生产商的订单，以确保今年晚些时候业务好转时产品零部件的供应。
但目前令投资者心惊肉跳的正是经销商可能在去年年底时下了太多的订单。
投资者发现，公司和零售市场的需求均有放缓迹象。他们担心，经销商和供应商可能会因处理过多库存而在收益上蒙受损失。人们不禁想到，在预期中的科技行业复苏过程中，库存过多这种情况出现得有些过早。
整个科技行业正在显露库存积压的迹象，并且其连锁反应已对科技类股造成打击。合同制造商类股跌幅尤为惨重，这类制造商专门为思科和惠普(Hewlett-Packard)等大型经销商装配及提供零部件，当中很多公司已表示，部分零部件订货至交货的时间越来越短，表明经销商也许在消化某些领域的过剩库存。令投资者担忧的是，下一步可能是合同制造商减少对半导体公司的订单。
合同制造商类股中跌幅居前的股票包括Jabil Circuit、Celestica Inc.、旭创(Solectron)和Sanmina-SCI Corp.，所有这些股票年初均一度上扬，但1月中旬以来一直逐步回落。Sanmina较1月份的15美元高点已下跌26%，上周五收于11.01美元，旭创较1月中旬的8美元高点下跌33%，至5.31美元。Jabil较1月份的32美元下跌10%，至28.80美元。
这些合同制造商并未明确表示哪家经销商在削减订单，但交易员中有传言称思科系统是其中之一。对此思科拒绝置评。但思科首席执行长约翰?钱伯斯(John Chambers)在2月初电话会议上的言论不免对传言起到推波助澜的作用，他当时对投资者表示，公司管理层这些天在支出方面比人们预想的更加谨慎。
科技类报刊《高科技战略家》(High Tech Strategist)的出版商佛瑞德?希基(Fred Hickey)称，投资者正在企盼好消息的出现，但思科有关需求的言论却与市场的期望大相径庭。希基说，随著思科在那次电话会议上承认当季订单交货比率下降，投资者也开始出现了一些不妙的预感。自1月中旬以来思科股价已跌去20%，现报23.40美元。
无线通讯运营商手机库存增加也引起投资者关注。例如去年年底Cingular的库存较上年同期增长一倍以上，预期中的更新换代阶段并未足以消化这些多余库存。该公司发言人称，今年前两个月公司已将库存削减23%。他补充说，考虑到去年第四季度销售额超过85%的增幅，目前的库存增长并不是很大。
随著投资者对库存及行业复苏力度的担忧日益显现，英特尔股价较1月份也下跌了24%。这只股票同时还受到一系列问题的困扰。邓利在3月1日下调半导体类股评级的报告中指出，零部件供应商订货至交货时间以及收入较上年同期的增幅都已经达到顶峰。分析师和投资者们称，从历史经验来看，收入增长放缓往往伴随著行业的整体回调。
即使像希基这样的看跌人士也仍然表示，他们目前还没有对科技类股彻底绝望。希基说，目前与2000-2001年的主要区别就在于，我们尚未看到需求崩溃。他表示，库存出现增长算不上不同寻常，如果需求出现增长，这些库存很快就会消耗一空。
随著有关库存的争论愈演愈烈，花旗集团的分析师克拉克?威斯特蒙特(Clark Westmont)在一篇生动的报告中写道：晶片周期的命运似乎就掌握两个小矮人手中。他们手里拿的魔戒就是"库存调整"，只有"硬件需求增长"的熊熊烈火才能将其毁灭。
也许这有些夸张，但库存增加到底将带来什么后果这个悬念的确将在一段时间内成为投资者关注的焦点。
