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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 156.06+0.6%12:59 PM EST
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To: Ian@SI who wrote (2292)6/30/1997 6:30:00 PM
From: Q.   of 10921
 
The takeover of Fusion is interesting for what it says about
valuations. Here's an excerpt from tonight's Motley Fool Evening News:

Semiconductor equipment manufacturer FUSION SYSTEMS (Nasdaq: FUSN)
gained $4 9/16 to $39 9/16 after announcing an agreement to be acquired
by industrial company EATON CORP. (NYSE: ETN) for $39 per share in cash.
Fusion has restructured itself in the past year, having sold its
ultraviolet curing business to focus on marketing machines called
"ashers," which strip away photoresist materials left after a pattern is
etched onto a semiconductor wafer. Without even counting the substantial
cash hoard on Fusion System's balance sheet, its multiple to forward
earnings estimates compared to other "front end" semiconductor equipment
companies looks like this:

Multiple to
1998 EPS Estimate
Fusion Systems 18.6
Applied Materials 19.9
Lam Research 32.8
Novellus 15.6
Mattson 16.9

**************************************

My comments:

Fusion had over $100 M in cash, so Eaton was really paying less than
18.6 X eps for the core business.

Some of the 1998 eps estimates are pretty shaky. Especially Lam and
Mattson. Both of those companies have been running about breakeven,
and so their eps could turn out to be anything on the map as they
enter a cyclical recovery. Estimates for NVLS and AMAT are probably better.
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