Hey Scotch, does this BKHM news give you any optimism in AVNX? Certainly AVNX and BKHM are in the same boat; Also, ALA is in the same boat as NT and does not want to lose its primary component supplier in 2006 (right as the optical boom gets really started), lest they have to pay more to JDSU and others.
I don't own any of the pure component providers. So, you're probably asking the wrong person. I've looked at both BKHM and AVNX and felt there were better places to put my money. Having said that, I do think that the BKHM news is encouraging for the sector, in general. IF there is fear that there's a possible component shortage a couple/few years down the road (and I'm not sure that's the reason NT made its decision), that would lead one to believe the telecom equipment companies are at least hedging their bets that there will be a big buildout.
On another company in the group, did anyone see the projections for a shortage this year in LCD glass? Corning could be an interesting play, since it could have the LCD glass market to bridge the gap between now and when they see a significant pickup in their telecom biz. I don't currently own it and would be interested in other views after doing your dd.
< did anyone see the projections for a shortage this year in LCD glass? Corning could be an interesting play>
I wrote a post on the AUO board about corning this morning. The news has sent AUO shares exploding upward the past 2 days. I think it is very bullish for AUO as corning serves to limit overcapacity in the entire LCD panel industry. That industryr sells very cheaply on a P/E basis because people worry about oversupply. Today they are realizing that undersupply and windfall profits are more likely thanks to Corning's smart management of industry capacity.
I enjoy giving unsolicited advice. The component supplier sector needs consolidation in the worst way IMO. It can't support 3+ monsters companies and many smaller competitors. I view the BKHM news as bad for AVNX. If BKHM goes out of business AVNX would be the recipient of more business at higher prices. This news was just a band-aid, it will prolong the suffering. Even if ALA does the same thing for AVNX I expect it will just delay the inevitable - CONSOLIDATION.
Chuck, you make NT sound like its some kind of giant spider keeping its prey alive to suck more blood out out of it!
I'm not as sceptical though. The fact remains that if demand "significantly ramps" in 2006 (as eloquently predicted by Opticalboom) then there will be more than enough business to go around. The demand equation is improving, but its still very early in the game, IMO.
Another way to look at AVNX is from a trade. If they get a similar deal from ALA or GLW, I'll be more than happy to cash in on a nice 70% gain, even if in the long run, they don't make it.