We have written so often on the overcapacity in flat panel displays that our regular readers are sick of hearing about it. So today we’ll let others do the talking.
TheStreet.com on Applied Materials (AMAT - Annual Report):

Applied Materials’ profit surged 81% in its fiscal fourth quarter, but the results came up short of Wall Street expectations.

And in a subsequent conference the call with analysts, the world’s No. 1 vendor of chipmaking equipment said its fiscal 2007 year would get off to a slow start.

CFO George Davis singled out flat-panel-display manufacturing as the prime culprit for the slowdown.

Barron’s Tech Trader Daily on Circuit City (CC):

Circuit City has been holding meetings with the Street recently in which it is warning that average selling prices for flat-panel televisions are falling faster than the company had expected.

Associated Press on Wal-Mart (WMT - Annual Report):

“We are implementing our most aggressive pricing strategy ever across core categories, such as toys and electronics,” Scott said in a prerecorded phone message.

John Menzer, head of Wal-Mart U.S. stores, said there were “huge sales increases” among the discounted toys and in some electronics.

“We’re seeing a big growth in our new categories such as flat panel TV’s, MP3 players, laptops and cell phones.

MarketWatch on Home Depot (HD - Annual Report):

Home Depot Inc. on Tuesday said that it would be “opportunistic” in selling consumer electronics this holiday season, as it looks to drive sales during the critical shopping period.

On its third-quarter earnings conference call, the home-improvement retailer said that it planned to use its large-scale buying power to offer low prices on consumer electronics such as plasma and flat-screen television sets.

The only surprise in all this is why anyone would be surprised. From one end of the food chain (equipment manufacturers) to the other (retail) the story is all about too much capacity and faster than expected price reductions.

Summary: The housing market is slowing for sure, and the low-end retail woes are spreading to high-end retailers like Best Buy (Plasma TV spending fears.) Some of the high-end toys like boats and snowmobiles are having a tough go, but it seems we’re still willing to pay up for a good night’s sleep.
Watch List Companies

Other News

Mattel (MAT) posted an upside surprise due to stronger than expected Barbie sales (take that, Bratz!) as well as promotional tie-ins with Cars and Superman. The company reported second-quarter net income of $37.4 million, or 10 cents per share, compared with a year-earlier loss of $94 million, or 23 cents per share. Excluding items, earnings rose to 8 cents per share from 5 cents. Analysts on average had been expecting 4 cents, according to Reuters Estimates. Revenue rose 8 percent to $957.7 million, surpassing analysts’ expectations of $922.95 million.

Harley Davidson’s (HDI) quarterly earnings rose 2.5 percent and it was on track to meet its 2006 shipments. Harley said its second-quarter net profit rose 2.5 percent to $243.4 million, or 91 cents a share, from $237.4 million, or 84 cents a share during the period last year, meeting the average estimate. Revenue rose 3.3 percent to $1.38 billion., sending shares higher in premarket trading. The 2006 outlook bucked a trend of disappointing results and scaled-back expectations from U.S. recreational vehicle makers, which have been laboring under rising interest rates and energy prices, and a slowing housing market.

Previously, several U.S. companies selling pricey toys for adults — including boatmaker Brunswick Corp. (BC), snowmobile manufacturer Polaris Industries Inc. (PII), and RV maker Fleetwood Enterprises (FLE), — reported lower quarterly earnings, saying economic headwinds were keeping consumers out of showrooms.

Coca-Cola Co. (KO) posted better-than-expected earnings boosted by its PowerAde sports drink and Dasani bottled water brands. Second-quarter profits were $1.84 billion, or 78 cents a share, up from $1.72 billion, or 72 cents a share, a year earlier. Excluding a gain from the sale of shares in the initial public offering of its Turkish bottler, Coke reported earnings of 74 cents, 2 cents ahead of Wall Street expectations, according to Reuters Estimates. In the past year, Coke launched a flurry of brands such as coffee-infused soda Coke Blak and energy drink Vault and extended flavors of existing brands like Dasani flavored water, to cash in on the growth in the energy drinks (led by Watch List member Hansens Natural [HANS]) and water segments.