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Politics : Formerly About Applied Materials

AMAT 235.24

+4.5%

Nov 19 3:59 PM EST

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To: StanX Long who wrote (45816)	4/23/2001 10:57:51 PM
From: Katherine Derbyshire	Read Replies (2) of 70976

I don't think a straight comparison to 97/98 is valid. For example, in 1997 it took four months for the BtB to fall from 1.0 to .82. A similar magnitude drop took only one month this year. Simply extrapolating the number of down months while ignoring the derivative (the rate of change for non-math geeks) is, IMO, unlikely to work. Bill McClean (using revenue growth numbers, not BtB) has suggested that the area under (integral of) the up-cycle part of the curve is roughly equal to the area under the down-cycle part of the curve. In fundamental terms, he argues that the excesses of the up-cycle have to bleed off in order to return growth to the long term trend line. If you believe his analysis, which I do, then you would expect steeper downturns to also be shorter. There's also a trace of good news in the billings number. Until recently, it hasn't fallen nearly as far or as fast as the bookings number, suggesting that existing orders are shipping more or less on schedule. Massive order cancellations would improve the ratio (by bringing billings closer to bookings), but would also indicate much more serious pessimism among the chip makers. Katherine

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