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.