thestreet.com
Is the Semi-Equipment
Group's Current Cycle
Maturing?
By Herb Greenberg
Senior Columnist
Originally posted at 6:30 AM ET 9/13/00 on
RealMoney.com
Trying to figure out the real story in the semiconductor
equipment manufacturing group? Keep an eye on
backlogs.
If they start falling (and you can be sure the companies
aren't likely to tell you when they are!), then you'll know
for sure that the current up cycle for semi equipment has,
in the very least, slowed. At least that's what Fred
Ramberg, an analyst at the Boston Brokerage firm of
Fechtor Detwiler, will be doing. I hadn't heard of Fred
until a week ago when I read a report in which he was
waving yellow flags over the chip-equipment group. (I first
mentioned his comments on RealMoney.com's Columnist
Conversation.)
In this report, Ramberg, who is highly regarded by those
who read him, speculated that some big chip-equipment
companies could have trouble meeting their expected
shipments for the quarter. The reason, he said, was a
shortage of mundane nontech supplies that, based on his
sources, caused Applied Materials (AMAT:Nasdaq -
news) to ship 27% less than it was expected to in July.
What he wasn't sure of, however, was whether this was
just a short-term glitch that would last maybe a quarter.
Then came Monday's earnings warning from PRI
Automation (PRIA:Nasdaq - news), a supplier to the chip
equipment group. "What's troubling me," Ramberg then
said, "is that PRI now projects flat bookings and
opportunities for the next quarter." The fact that orders are
flat got Ramberg to wondering whether that's the first sign
that the current semi-equipment up cycle could be
maturing. (Note he says "maturing," not "falling." That's
an important subtlety.)
The reason he isn't quite sure just what's going on is the
nature of the slowdown and the cancelled shipments.
Remember, the larger companies are having trouble
getting supply, perhaps because early on, in the big
companies' attempt to bigfoot smaller competitors, the big
companies took on too many orders. The result, now,
could be little more than a shift in those unfilled orders to
smaller competitors, which hadn't overbooked themselves
and therefore still have ample part supplies. If that's the
case, then this really is little more than just a temporary
slowdown.
That's where the backlog comes in for companies like
Applied and PRI. "If I hear of cancellations of backlog, that
will give me the answer," Ramberg says.
Applied Materials, for its part, told me last week that it is
"continuing to work closely with suppliers" on shortage
issues and that it expects "no change on published
guidance." One thing is for sure: Don't expect Applied or
any other company to be chatty about a decline in
backlogs. The best clue will be, come the next earnings
reports, if they don't mention them at all! |
