Brian and Threaders,
I think Sue doesn't have all the data. As one who lives near AMAT's primary manufacturing center, I have a different (and unfortunately, more gloomy) take on the current situation.
First off, this isn't a plain vanilla slowdown, and it hasn't rolled out slowly. It's coming on more quickly, and with greater depth, than either the 1998 or the 1996 event. Today, after close of trading, AMAT announced they would miss revenue and profit numbers. In addition, they announced locally (but just as publicly) that there will be no contractors left on site by early February; that all senior management and executives will take pay cuts; that there will be 5 shutdown days this quarter (not quite a 10% cut across the board); that there will be more drastic efforts in Q3 if the situation doesn't improve.
All these pre-emptive efforts are coming much earlier in the downturn cycle than previous events. Either AMAT has decided they moved too slowly last time, or that this downturn will be a real doozie.
I also have it on good authority (which means I drank a beer with a guy who knows another guy) that the projected factory run rates will be at about 100 units (a relative number) in Q2 (Feb-Apr), when they were at 262 units one quarter ago. (Don't ask me what the unit is, he said he'd have to kill me if he told me.) No matter how you stack it, that's a hellacious drop. And there's greater fears about Q3.
Now keep in mind, I'm not an analyst, and I don't work for AMAT. So I don't really KNOW it'll be that bad. But the mood in this town is uglier than it was in either the 1996 or 1998 events, in my opinion.
I'm still of the opinion this will be over fairly quickly; but I said that last time too, and it dragged on for a while before explosive recovery happened. If it's a quick enough down-and-up, then I don't think AMAT will do a general layoff. But I wouldn't bet against that, given their HR track record in previous slides. In any case I look for about 10-12 days of shutdown in Q3 (May-July), or about 17-20% cut. These are unpaid days for the workforce.
Will AMAT gain market share, as Billat believes? This I also believe to be true. They're in a strong cash position, and can give margins now to squeeze out (or simply buy) weaker entities. They'd be fools not to pursue a share growth strategy where possible.
But it may get bloody anyways....
Mitch (sending smoke signals from his bunker)
PS I can see where Billat believes this downturn is rolling out slowly; stock prices dropped months ago, when fundamentals didn't change. That's a mirage; that stock valuation loss was due to the overall bubble bursting in the wake of other factors, mostly the dot-com to dot-bomb to dot-gone effect. The real downturn didn't raise it's ugly head until about last month or so, and it's going down Real Fast Now. M |
