Two reports from CSFB from 09/29/99. First on AMAT; second on the Taiwan effect. Jeff
<<
Applied Materials (AMAT-$80 11/16-Cap $30B-Buy) Elliott Rogers,
AMAT Will Take Over Flat Panel CVD Business Joint-Venture
FY99E:$1.72, FY00E:$2.85
* Reversing 1999's Exit -- In Q4:98, AMAT wrote down its 50% investment in the
AKT flat panel CVD business, taking a charge of $58MM. Subsequently, the
business has enjoyed an upturn, and AMAT will buy out Komatsu's 50% interest,
taking control of the operation.
* Modest Plus Possible In F00 -- Reversal of last year's charge and writedown of
R&D will create some noise in Q4's results. From operations, we continue to
look for EPS of $0.64, or more. The venture could be a modest contribution to
F00 EPS, currently not in our projections, if revenues top $100MM and the
business enjoys double-digit operating margins.
* Taiwan Impact: Neutral to Plus -- AMAT, like other process equipment vendors,
has experienced a lift in spares and support demand from the region. No slip in
orders or deliveries to the foundries in Taiwan is anticipated.
<<
Conference Call Summary: Taiwan Earthquake-Impact on Semi/Equipment Industries
Elliott Rogers, Charlie Glavin, Tim Mahon,
* Semi Capital Equipment - Elliott Rogers
* Bottom Line -- We expect a 3-week long impact on output, with the first few
wafers seeing sub-par yields. Excluding furnace and lithography equipment,
there has been little material damage. At DPMI/UMC's operation, there has not
been much damage to reticles. None of ASML's steppers were damaged, but they
will have to be recalibrated, which could take 1-7 days. Thus the bulk of the
problem is with furnaces. We estimate that a fab could meet its line speed
requirements with 50% of its furnaces running. Japanese suppliers such as Tokyo
Electron will have to expedite shipments of furnaces to Taiwan.
* No Material Impact On Semi Equipment Orders -- We do not expect the quake to
impact Q3, which is still seeing linear orders out of Taiwan, or Q4. Most
companies had strong orders from the region in July and August, and will not
need a late September surge to meet their bookings bogey. Taiwan is not
expected to decrease its capex. The test industry has historically
double-ordered in tight situations, and we have seen little of this so far.
Demand for spares and service is increasing, but the effect is mainly
"background noise" for most front-end companies. LRCX and NVLS are not
affected. AMAT is seeing some spares business.
* Whatever Slips From September Will Be Made Up In December Quarter -- Some
systems orders will obviously slip from H2:September into October/November, but
they could be more than offset by pull-ins from other regions. December quarter
is looking strong, with Korea, Europe, Singapore, and regional accounts in the
U.S. up sequentially.
* KLA-Tencor A Beneficiary -- KLAC could be a winner due to increased orders in
metrology tools from Taiwan, which are needed to monitor damaged wafers and
improve lowered yields. We expect bookings to be up 15-20% sequentially,
adjusted for seasonality, for an already strong quarter.
* Silver Lining re: Inventories -- Shutdown of foundries will preclude a Q4
Y2K-related buildup of chip inventory, and minimize the possibility of any
inventory burn in H1:00. The situation is unlike 96-97: this is a supply
shortage, not a demand issue. |
