Wednesday, August 24, 2005

3M boasts Chinese sales

3M (MMM)hit 52 weeks low yesterday and suddenly Company are talking up their Chinese sales growth +25% for the next 5 years. Hmm, first of all, I would consider the timing fully suspect. Second, MMM still depends on 40% of its sales from domestic operations and Asian operation is about 26%. Now, Chinese operation is only 8% of operation, it immediately throws a red flag in my face as regular readers would know by now company's tricks to obfuscation tactics by steering attention away from potentially slowing main operations (past examples, VIACOM, EBAY etc).

When you have only 8% operation in China at this late stage of the cycle, YOU ARE NOT A CHINESE PLAY period. Plus, Chinese economy has been growing for decades, only now when Joe Investors are finally plowing their hard-earned money in BIDU (BAIDU, Chinese internet portal play) that MMM is finally waking to China? Too Late (read my thoughts on Chinese potentially being the catalyst for a melt down in global economy below). Simply extrapolate linearly for the next 5 years is downright dangerous planning. Think about it, if forecasting are so easy, try to extrapolate crude oil prices when it hit $11 in 2001. It should have gone lower by linear projection.

As I have said many times before, when the fastest growing but smallest part of a company's business is being touted by company executieves, you are forewarned!! RUN FOREST RUN!!


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