Doug Kass (a great mind and hedge fund manager) on the Book to Build ratio number.....worst ever----
Doug Kass
5/23/01 5:52 PM ET
Semi equipment book-to-bill numbers (0.42) were not only way below analysts
forecasts (0.625) but were the worst figures ever recorded since the data was compiled ten years ago...The prior low reading was Summer, 1998 at 0.56.
The 41% sequential drop in orders was also the most rapid descent. The prior low was 17%, which was set last month.
Also, the 77% drop in total bookings from the October, 2000 peak surpasses the peak-to-trough declines of 55% in 1996 and 70% in 1998.
HOWEVER, there are some signs of a bottoming..
(1)Cancellations of previously reported orders were big contributors to the monthly order declines. Revisions were made (8%, and 6%) of prior month order totals. During the most recent conference calls, many eqpt. manufacturers said that cancellations have subsided.
(2)According to Lehman, "chip manufacturers are maintaining their investment in equipment for leading edge processing capability. Investment necessary to enable the transitions to 300mm wafers, copper interconnect, and 0.15 micron and below processing should provide a floor for incoming orders." In essence, manufacturers can't cut back more on orders while maintaining
commitments to new technology.
(3)Again, according to Lehman, "The rate of decline in semiconductor chip revenues, fab cap rates, and eqpt. orders lead us to believe that chip manufacturers are cutting back hard on cap x in order to stave off installation of significant excess capacity and that system OEMs are highly focused on reducing chip channel inventories. Both of these factors should help the trough in semiconductor eqpt. fundamentals to arrive sooner."
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