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Market Madness and a Saner Supply Chain

Just a scan of today's Wall Street Journal headlines will give you an idea why (aside from Securities and Exchange Commission rules) electronics executives don't forecast business more than a quarter ahead.

    Slowdown Fears Slam U.S. Stocks

    Data Signal Trouble for Economy

    Fed Eyes European Banks

Since publicly traded companies — including many in the high-tech industry — rely on the stock market to raise capital, the wild swings of recent months understandably have everyone nervous. For better or worse, electronics is a global industry, and the fate of US companies is tied directly to Europe and Asia. If the US picture looks confusing, the global one is even more so. But sharing information is one way the supply chain, at least, copes with volatile supply/demand cycles.

The electronics industry used to run on fairly predictable seasonal cycles of supply and demand, slowing down in the third calendar quarter and picking up in the fourth. A number of things have happened to disrupt these cycles: tech bubbles, recessions, and flus (Asian and bird). Improvements to the supply chain have also affected cycles. They seem more compressed than they used to. A decade ago, a slowdown in demand among OEMs might not have been felt by component makers for months. Now warning signals start flashing in weeks.

Improved communication among supply chain partners has enabled the high-tech industry to respond better to these cycles. It doesn't make them any less painful, but at least we adjust pretty quickly.

Another way we cope is by gaining insight through experienced market watchers such as executives, consultants, and analysts. Many of these people have been around for a number of cycles and can help add perspective to what we are seeing now. I've had the privilege of working with some of these folks over the years, and one of them is now with Stifel Nicolaus & Co. Matt Sheerin, a senior equity research analyst and managing director with the investment firm, has been an analyst for more than a decade. Before that, he watched the buyers' market as editor-in-chief of EBN.

Sheerin joins us next week, Aug. 23, at noon ET to talk about how current trends are affecting players in the supply chain world. His experience as a journalist and an analyst makes him a particularly good guest (and typist). Join us at Market Madness and the Supply Chain.

4 comments on “Market Madness and a Saner Supply Chain

  1. AnalyzeThis
    August 18, 2011

    Right now, trying to forecast the current market trends is like a weatherman trying to forecast the weather while being flung around inside a tornado. In my opinion, of course!

    As you say, electronics is used to a fairly predictable seasonal cycle. Yes, sometimes you'd run into years where you encountered some “interesting' decisions during the holiday season… but at the moment it seems simply impossible to guess what's going to happen during the holidays when nobody can say for certain what's going to happen next week.

    Anyhow, it's certainly an interesting subject for a chat: plenty to talk about!

  2. Daniel
    August 19, 2011

    Barbara, for most of the high tech companies their ratings and capital assets are depended on share values. If stock market values are going down, it may affect their plans for capital collection from public either through NFO or IPO. More over any economic instability can decrease their profit values and may increase the borrowing interest rates.

  3. FLYINGSCOT
    August 19, 2011

    I see many companies paralyzed with indecision on how to deal with the present turmoil.   Normally it results in battening down the hatches and cutting expenditure. I wish some industry leaders would take a more visionary (and perhaps controversial) stance and lead us out of this mess.  I will not hold my breath though.

  4. Anand
    August 19, 2011

    “Right now, trying to forecast the current market trends is like a weatherman trying to forecast the weather while being flung around inside a tornado. In my opinion, of course!”

    @DenniQ, I totally agree with you. Its very difficult to forecast the current market trend. But then again I feel this market will throw up some uniqe oppurtunities. If a company is sitting on huge pile of cash they can easily go and acquire small companies because the valuation are cheap. 

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