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Technology Stocks : LRCX this one looks good

LRCX 157.46

-2.2%

Oct 31 9:30 AM EST

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To: Jim Tao who wrote (102)	2/26/1996 7:01:00 PM
From: Mr. Sam	of 142

Jim, the R&D spending for Lam in the last 6 months has averaged 13.8% of sales (down from 15.9% in the year-ago period). The margins for Lam will improve over the next several years relative to their competitors because they already have a technology that is adequate for the next two generations of equipment purchases in the Etch area (by far Lam's largest business segment). While competitors have to increase R&D spending to meet the customer demands for those generations, Lam will be able to hold spending relatively flat, improving their margins. You asked about AMAT's R&D spending. As AMAT's sales have grown from $638M in 1991 to $3.06B in 1995 (Oct. fiscal year), their R&D as a % of sales has declined from 16.1% to 10.8%. I expect AMAT to grow at about the same rate as the entire industry. I expect Lam to grow a little faster because of the R&D trends above and because of the dominant products of Lam's biggest customers. Lam's customers are mostly U.S. based (Hitachi and TEL have significant market share in Korea and Japanese markets for etchers). In the U.S., there are relatively few DRAM producers, an area that is expected to underperform logic in terms of the rate new equipment is purchased. The new logic fabs being built in the U.S. at Intel, AMD, and Motorola are all buying Lam equipment (and some AMAT equipment, too). Meanwhile, the AMAT equipment sales in Japan and Korea that are reflected in their historical numbers will be slowed as the increasing DRAM supply discourages building new memory factories. So, AMAT's top line will probably grow at close to the worldwide industry average. LRCX's revenues should grow slightly faster. LRCX's bottom line should grow even faster because its valuation is still low relative to its prospects. I will answer your questions about KLIC and TNCR in a later posting.

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