to FLSTF97 re AMAT:
Neither of us have posted recently here, and I was wondering if you had any thoughts about recent events in the semi and semi-equip industries. As I recall, both of us sold our AMAT at the right time, based solely on valuation concerns. Neither you nor I, nor anyone else, was smart enough to see the latest cyclical downturn coming. The consensus predictions were that the upturn beginning in late 1998 would go on and on, till 2002 at least. Also, as I recall, you thought AMAT was a King and potential Gorilla, while I was leaning toward Gorilla status.
My prediction, that the semi-equip cycle would, in the future, align more with the general economic cycle, seems to be coming true. In 2000, chip demand lagged expectations first for PCs, and then for telecom uses, then across the board, and now capacity purchases for semi-equipment have fallen off a cliff.
Technology purchases, however, seem to be continuing. The question is, will they now collapse as well? In the last downturn, the entire semi industry shelved plans for the 300mm transition, and AMAT had to take a huge write-off, having spent a lot of money developing tools nobody wanted. Now, the 300mm (and copper) transitions are further along. Intel bravely says they will maintain their capex budget, in the face of industry-wide falling margins, rising inventories, falling capacity utilization. Will Intel's lead force other semis to continue technology purchases, or will Intel's resolve fail?
If technology purchases are going to continue, then AMAT at 40 (the bottom of the current 40-50 range) is a good buy. On the other hand, if (as in all other down-cycles) technology purchases are going to fall off steeply after capacity purchases have, then I don't think it's safe to buy AMAT until prices at or below 30 are reached, and probably not till later this year.
I am convinced that AMAT will come out of this downturn having achieved Gorilla status. They continue to gain market share, increase their margins, solidify "marriages" to semi companies with longterm service contracts, and offer a Cisco-type end-to-end solution, as they serially invade the various semi-equip sub-sectors, overwhelming the niche players.
Further, the next upcycle is going to be immense, with 300mm and copper, together with ever-smaller line widths, forcing a huge bulge in capex budgets.
Thoughts? |
