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Politics : Formerly About Applied Materials

AMAT 327.03

+2.5%

Jan 16 3:59 PM EST

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To: brunn who wrote (45694)	4/20/2001 10:43:35 PM
From: Katherine Derbyshire	Read Replies (3) of 70976

Something to think about re: AMAT's valuations. Over the last several years, AMAT has not only gained market share vs. other equipment companies, it has also absorbed more and more of the total value added by the semiconductor manufacturing process. That is, an AMAT customer is buying more and more process expertise in addition to the equipment. In an efficient market, a larger share of the total revenue generated by a customer fab (and by the IC industry as a whole) should therefore end up in AMAT's coffers. This shift amounts to a change in business model for AMAT. You would expect a different business model to receive a different valuation. You would also expect the new business model to have different cyclical characteristics, leading to changes in peak and trough valuations. (Note also that very few equipment companies are supplying process expertise to the same extent, making valuation comparisons to other equipment companies difficult.) I don't have an opinion on whether AMAT is fairly valued at these levels or not. But if it were my money I would be very cautious about using 1995 and 1997 valuations as an indicator. Katherine

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