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Politics : Formerly About Applied Materials
AMAT 318.63-3.0%Feb 3 3:59 PM EST
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To: Joe Donato who wrote (4895)5/27/1997 6:16:00 PM
From: Cary Salsberg   of 70976
 
Joe,

RE: "I know an analyst that believes that the semi-equipment companies are at a "relative" top of the cycle, and AMAT looks like they are valued too high..."

I think I understand your idea, but I don't like your terminology. I think the math term "local maximum" is what you mean by a "relative" top. You are saying that sales and orders will pull back or flatten in the short run before the semi-equip recovery resumes the uptrend.

Stocks such as UTEK and LRCX have announced flat prospects and have been priced accordingly. AMAT gave guidance for the rest of 97, but were not specific on 98. AMAT is projecting $4.1B in 97 orders. $4.5B-5.0B sales in 98, 10-20% increase over 97 orders and less than the 30% growth rate stated be AMAT management, could produce a $4.00 EPS. This could support a $100 price if "AMAT is...valued as if it is at the bottom of a business cycle getting ready to explode." Most of the industry believes that they are at the "bottom", and that a significant growth period is ahead. I wonder if your friend is suggesting a pause or if he doesn't buy the expansion to smaller geometries, larger wafers, and generally greater semi output which is demanded by higher semi content in all our products.

Cary
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