Eurodis @1.07 oversold!!

taken from ample :

Subject: Distributors are seeing the light at the end of the tunnel.

extracts from an article in Electronics Weekly (4/12/02):

Pessimistic optimism

Many distributors are seeing the light at the end of the tunnel as signs indicate that the industry may be coming out of the recession, but such optimism is cautious and pessimism that the upturn may not be large or even imminent still exists. Richard Wilson writes.

The industry may in part have talked its way into the current recession, but Axel Hartstang, European president of Avnet, is confident that talk can play its part in the recovery. “To a degree we may have talked ourselves into a recession and I am sure we can talk our way out of it,” quips Hartstang, who is taking a far from pessimistic view of the components market for next year.

“I expect double-digit growth (in the market) next year, driven by pricing,” says Hartstang.

Brian McNally, Arrow’s managing director for Northern Europe, is someone else who is determined to remain optimistic about business prospects for next year. In part he was encouraged by the mood at last month’s Electronica exhibition in Germany.

“While they may provide anecdotal rather than empirical evidence, trade shows remain a good barometer for gauging the fortunes of an industry,” he says. “Unlike the upbeat Electronica of just two years ago, it is fair to say that most exhibitors went to this year’s show with a certain trepidation and an expectation of continued pressure. However, over the course of the four days there was a palpable change of mood, with many exhibitors confirming positive customer and prospect meetings and, significantly, optimism that short term scheduling and pricing will be replaced by longer term visibility and increased purchase levels.”

Martin Kent, chief executive of Abacus group, is also cautiously optimistic about business opportunities in specific market sectors. “The opportunities we are seeing in the defence and medical sectors in particular are giving us some hope for optimism,” says Kent.

McNally believes there is a consensus of confidence in the industry that the second half of 2003 will see markets begin their recovery. “What’s more,” says McNally, “there is empirical evidence to support this confidence. In North America, for example, the market appears to be getting near the bottom, the run rate is flat to up, and there are signs of a slow but erratic recovery. This is good news for Europe, which typically follows the US market with a lag of around six to nine months.”

According to Hartstang, fab utilisation around the world has increased steadily this year and, while he stopped short of predicting specific component shortages, he says we have to consider it a possibility. “Fab utilisation is high right now,” adds Hartstang, “which could lead to a shortage situation.”

One reason for Hartstang’s optimism is his belief that most excess inventory has left the supply chain.

“Pricing has been stabilising and we are already seeing increases in some areas,” adds Hartstang. “The pessimistic view is there is no killer application coming along, but while mobile will certainly continue to suffer next year, networking is starting to improve, in particular with wireless technology, and there is also good growth potential in the digital consumer markets of Asia Pacific and Japan.”

At Arrow, McNally is already seeing increases in unit sales, although these are being hidden by the fact that average unit selling prices are down. “Such volume increases would seem to be a positive indicator that the next stage of the cycle is now on its way,” he says with a smile.

According to Hartstang, some prices have deteriorated by 35 to 40 per cent, but he warns that the industry must not put all the problems down to pricing. “This has not just been a price driven recession, but unit driven also,” he says.

Lower prices are something the industry has learned to live with, says Kent. “Prices for some commodity products are back to where they were in the 1970s,” says Kent. “This is certainly an industry where price inflation has little or no relevance.”

For broadliners, the average selling price across the business can be misleading. “It depends on the product mix,” says Kent. “For example, compared with the falling prices on many commodity products, pricing on analogue parts has held up this year.”