Howard,
Short to mid term (6-12 months) the stock probably isn't going
to break any records. These external economic influences will
have a negative affect on all semi-manufacturing stocks until
things settle down and stabilize. Korea will take 2 years, at
least, to recover. Japan has been floundering for several years,
and Taiwan is under some pressure also. These countries have
no choice but to increase exports to offset currency devaluations
against the dollar which will pressure US companies to compete
by reducing prices and margins. To me this signals the beginnig
of austerity budgeting measures to reign in expenses, typically
this means fab delays or postponments and, inevitably, reduced
capital equipment purchases except for essential enabling
equipment necessary for new products.
AMAT backlog will support its profitability for 6 months or so
(about $1.7B backlogged orders) even with no new orders, if you
consider that they get, say 50% of normal quarterly orders, then
they will still make about $3 to $3.5 billion this fiscal year.
Not bad in a down market. That is assuming that things don't
get terribly worse. Things should take off again in '99 as
markets and currencies stabilize and new technologies require
better manufacturing capability.
AMAT is a very smartly run company and the management will take
whatever measures are necessary to try to maintain profitability,
including personnel layoffs and management pay cuts if required.
They have done this in every prior "downturn" in the business
cycle over the last 15+ years.
The key is patience, and continuing to invest as much as
practical while stock prices are this low. When the industry
turns around and new fabs and technologies are needed this
stock will easily double, or even quadruple, in very short order
as funds and investors take advantage of the stock/industry
growth. I expect that the funds will come back in sometime
in mid-late January and the stock price will again be in the
low to mid 30's.
Just my opinion,
Regards,
BB |
