Semi Equipment Analysis Message Board

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Technology Stocks : Semi Equipment Analysis

SOXX 299.81

+2.7%

Dec 19 4:00 PM EST

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To: Cary Salsberg who wrote (259)	1/16/2001 11:02:45 PM
From: Czechsinthemail	Read Replies (2) of 95617

Cary, I have serious reservations about the predictions for semi equipment earnings while going into a very rapid and pronounced slowdown. As you pointed out, there is a certain momentum that causes both expansions and contractions to move to extremes. This has created a discrepancy between the pattern of falling forecasts for semi equip companies and the recent pattern of rising stock prices. Much of this, I think, comes from the oft-repeated mantra that the economy will recover 6 months following the Fed's rate cut. Perhaps that will come to pass, but I think it is too soon to know that it will. Intel's announcement today that they would increase capital spending gave a significant boost to the semi equipment companies in the after hours. But Intel also forecast a dramatic decline in revenues going forward and poor visibility. The market response of the semi equipment companies since the beginning of December has been extremely positive. But is it possible to have a clear sense of how deep or long the decline may be so early into it? Though many make analogies to 1998, one difference I see is that this time the Fed is perceived as having been much more aggressive in raising rates and much slower in deciding to lower them. The surprisingly rapid and profound economic slowing, which elicited the unprecedented 50 pt interim rate cut, may not have been fully discounted in terms of its severity or its duration. If we see a combination of declining cash flow among semiconductor companies and a general credit contraction, it is hard to imagine the kind of capital spending necessary to fuel a recovery for the semi equips. So what is your take on the early returns from NVLS and TER?

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