Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 249.89

+3.1%

Nov 26 3:59 PM EST

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To: Proud_Infidel who wrote (44760)	3/29/2001 10:59:03 PM
From: brunn	Read Replies (2) of 70976

CSCO's P/E based on estimated 2001 earnings has fallen below that of AMAT for the first time since 1994. quicken.com CSCO's P/E based on its 2001 earnings projection is 24.5, while AMAT's is 34.6. It is possible that CSCO's earnings are more questionable, however, as I believe they use options for employee compensation to a greater extent. Also, they have had a tendency to buy out many smaller companies and write it off under goodwill which I believe can also be a way of inflating earnings. More than anything, though, I think the dramatic fall in CSCO's price is based on the shock of finding out their business is cyclical and with that the uncertainty of how bad the cycle will play out. With semiequip stocks like AMAT, the market has grown much more comfortable with the cyclicality of their business due to this being the 3rd downturn in 5 years--AMAT has shown how well they can weather the storm whereas CSCO has not. I still remember the shock of seeing AMAT's P/E in single digits when they first fell back in 1996. Obviously, people were much more uneasy with AMAT's cyclicality at that time than they are now (analagous to how they are looking at CSCO now I believe.) Hopefully, the market's confidence in AMAT's ability to rebound will continue.

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