Panel Prices Pinch Profits

By William Trent, CFA of Stock Market Beat

We have written often on the flat-panel market, where we are concerned that existing capacity and planned expansions will cut so deeply into prices that by the time demand and supply are back in balance the industry will be mature. Some of the smaller manufacturers may be squeezed out before then:
Panel maker TPO profitability target postponed

TPO Displays, a major small- to medium-size panel provider in Taiwan, stands a chance of turning profitable in the second half of 2007, according to company chairman and CEO Ray Chen. In July, the maker said it expected to turn profitable in the fourth quarter of 2006.Chen said TPO is continually improving its performance. However, he admits an unexpected panel price drop has hindered the improvement. Already keen competition in small- to medium-size panel prices has been made worse by more participation in the segment from panel makers’ third-generation (3G), 3.5G and 4G plants.

By the second half of 2007, much of the growth in the flat panel market – especially for small and medium-size panels – may already have passed.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Ceradyne (CRDN) put options; Lion’s Gate (LGF) call options; Dell (DELL) put options; Plantronics (PLT) put options;

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