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Vacation's great, until you come back and realize you can't find your favorite stocks where you left them. LSI at four bucks a share? Atmel at three and change? Many companies are bouncing to 52-week lows, even as the semiconductor industry roars through a boom cycle. So what gives?
You can look at it a few ways. The "bartender, I'll have a double" analysis states that the market has already factored in more bad news about insurgency in Iraq, threats to the homeland, oil prices stuck above $50 a barrel and the presidential race between Tweedle Dee and Tweedle Dum. What else could possibly explain LSI at $4 a share? Is it being done in by structured ASICs? Nah. If that kind of pressure was the culprit, LSI would have died 15 years ago, when FPGAs were coming into their own and anyway, LSI has a structured-ASIC play.
Then there's the Alvin Toffler analysis: The market has already accounted for the future business model of the chip industry. It's a world where not only gates are free but silicon itself is essentially free and where software that's more or less free is the differentiator. It's a highly consolidated world of perhaps three IDMs, a handful of fabless companies (the rest will have died a painful death trying to figure out how to get their designs to yield with their foundry partners) and three foundries. Oh, and one distributor.
Then comes the stupidity analysis, which posits that even a stupid financial or market analysis, if stated loudly enough, can gather a following. If you buy the "market consolidates/CAGR drops to 10 percent from its historical 15/there goes the summer house" philosophy, then you ignore the lessons of technology, to wit: A tech innovation used to create end products is employed in some fashion to change the nature of their creation, begetting new business models, new products and new eras. For example, no one who witnessed the dawn of the silicon age could have foreseen the rise of third-party software as an engine of design productivity and enabler of business models.
Two years ago, I wrote about the Blue Light specials that surfaced during the depths of the semiconductor recession. Cypress and AMD were around $3 a share at the time. They both soared not long after, on an upswing with the rest of the tech stocks.
The Blue Light's back, and the deals are better than ever.