ALU

To conclude my thoughts on this thread:

* I did buy ALU at $1 but with half of my current bet for a stock.

* After reading the comments and two articles plus some previous articles from WSJ, I change my opinion on ALU. I'll not buy any more. It has same chance to go to 50 cents or $1.50 in a year for the following reasons.

* To go to 50 cents.
- The company is not recovering esp. with the global recession that I expect to continue with Obama's policy and the EU crisis.

- It could bankrupt if they cannot service their long-term debts that is larger than the entire market cap.

- The problem is not management as the stupidest fool cannot make it that worst. However, they have to lay off more than the announced to save some cash.

- The problem is China, namely Huawei. I have friends retired from Lucent and one still working in Bell Lab. I estimate their average compensation is over $200K for top engineer (some have patents) and researcher (most are PhD from top universities). Chinese engineers and researchers have a fraction of this compensation.

China is a major market for Huawei and when it IPOs, it would add wings to its already strong body; a public corporation will attract professionals and leaders esp. for this size. China's huge market will be a good customer base for Huawei.

It reminded me of one apparel stock I owned. It could not compete with low-wage country even before lifting the embargo to China. When the management did not do anything positive, it will die.

* The reasons it will go to $1.50 next year.
- Cisco may buy it with a combination of stock and cash and it is better than giving dividend (that has raised the stock price and great for those who have options).

Cisco does not have the state-of-the-art technologies that ALU, Huawei and Ericson have. It will be a strategic buy but 2B plus the hefty debt is not too easy to swallow.

- EU intervention with US's help.
EU is a mess now and I do not think they can bail it out. I expect they will encourage EU and USA to buy ALU's products and stop Huawei.

Cisco is successful in doing so arguing with security reason. It is not a valid reason as some of the internet traffic has been routed to Huawei's products already.

It is too risky for me and there are plenty of safer bargains else where.