Investment Opinion
FOOL PLATE
SPECIAL
Scripopoly
So, the semiconductor industry's book-to-bill number seems to have improved. But look, behind those numbers are other numbers, and they do not look quite as pretty:
- billings increased by 14.6% year-over-year
- bookings decreased by 2.8% month-over-month
- billings decreased by 2.6% month-over-month
-- In May, - bookings decreased by 24.1% year-over-year
- billings increased by 5.8% year-over-year
- bookings increased by 0.5% month-over-month
- billings decreased by 3.1% month-over month
In May, the American semiconductor manufacturers followed by the Semiconductor Industry Association (SIA) had a greater decrease year-over-year in new business and a smaller increase year-over-year in actually completed sales. Although the amount of new business has actually increased a little in April-over-May, probably due to greater price stability, new business continued to decline sequentially.
Ever wonder why you don't see a book-to-bill ratio for auto parts? Certainly it is a multi-billion dollar, worldwide business, just like semiconductor chips. Many companies in different niches battle it out with each other for the business of mostly larger companies, expanding when necessary, buying expensive toys from capital equipment companies to make their parts with. The dynamics of this capital-intensive, capital goods business is very similar, with one caveat -- the secular growth rate of the electronics component business is much higher than the more mature auto parts industry. For some reason, most capital goods industries stick closely to actually revenue growth rather than worrying about the ratio of orders booked to orders billed, because as they mature into slower growth industries they do not suffer all that much from limited capacity. Revenues tell the whole story.
For the investor watching the electronics capital goods industry grow to massive proportions, jettisoning a book-to-bill measure and looking to actual revenue growth as a measure of change in supply and demand begins to make more sense as the industry gets larger. When the semiconductor industry was predominantly American and suffered from massive capacity crunches, the book-to-bill made sense. With the majority of worldwide capacity overseas now, and not measured by the SIA book-to-bill ratio, looking at the actual revenues booked versus revenues billed instead of some weighted average of contributing companies makes all the sense in the world. And in that sense says we ain't out of the woods yet, despite the fact that the book-to-bill was above expectations.
Attention, KMART <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KM)") else Response.Write("(NYSE: KM)") end if %> investors! Merrill Lynch initiated coverage of the discount retailer with "intermediate-term buy" and "long-term accumulate" ratings, sending shares up $11/16 to $13 3/8.
Electronic component company DEL GLOBAL TECHNOLOGIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: DGTC)") else Response.Write("(AMEX: DGTC)") end if %> was started by Hancock with a "buy" rating today, with the firm offering a 12-18 month target price of $16-18. Shares rose $1/2 to $12 1/4.
CKE RESTAURANTS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CKR)") else Response.Write("(NYSE: CKR)") end if %>, operator of Carl's Jr. restaurants, reported same-store sales up 12.7% in the first quarter. Shares jumped $1 1/2 to $26 1/2.
CIRCUIT CITY STORES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CC)") else Response.Write("(NYSE: CC)") end if %> surged $2 1/8 to $38 3/8 on an upgrade from "market perform" to "intermediate-term outperform" by Everen Securities.
KNIGHT TRANSPORTATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KNGT)") else Response.Write("(NASDAQ: KNGT)") end if %> popped up $1 1/2 to $20 1/4 after Morgan Stanley initiated coverage with a "strong buy" rating.
International ski binding marketer MARKER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MRKR)") else Response.Write("(NASDAQ: MRKR)") end if %> posted earnings of $0.05 per share, compared with a loss of $0.12 in the year-ago period, sending shares up $3/8 to $7 1/2.
Educational software company EDMARK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: EDMK)") else Response.Write("(NASDAQ: EDMK)") end if %> warned that it won't meet analyst estimates for its fourth quarter, and will probably sustain an operating loss. Smith Barney downgraded the company from a "1" to "3", with shares plunging $4 to $20 1/4.
In sympathy with Edmark, SOFTKEY INTERNATIONAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SKEY)") else Response.Write("(NASDAQ: SKEY)") end if %> dropped $2 9/16 to $24 3/8. BRODERBUND <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BROD)") else Response.Write("(NASDAQ: BROD)") end if %> also fell, down $3/4 to $40 1/8 after a downgrade by Smith Barney from "outperform" to "neutral".
Rapid prototyping company HELISYS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: HELI)") else Response.Write("(NASDAQ: HELI)") end if %> posted disappointing earnings results today, netting $0.01 per share, compared with a gain of $0.19 per share last year. One would think this news would sink shares a little, but as of this writing, no shares had actually traded.
INTERNATIONAL TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ITX)") else Response.Write("(NYSE: ITX)") end if %> warned of a first quarter net loss due to Federal Budget-related Defense Department delays and slowing commercial demand. Shares retreated $1/4 to $3 1/8.
Electronic component company SHELDAHL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SHEL)") else Response.Write("(NASDAQ: SHEL)") end if %> warned that its fourth quarter net would disappoint analyst expectations, sending shares tumbling $2 3/8 to $23 5/8.
Randy Befumo (MF Templar), a
Fool Transmitted: 06/05/96
Selena Maranjian (MF Selena),
another Fool