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Technology Stocks : Semi Equipment Analysis

SOXX 298.01

-0.5%

Dec 15 4:00 PM EST

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To: Crossy who wrote (1649)	1/15/2002 10:26:16 AM
From: Kirk ©	Read Replies (2) of 95579

Accounting for Cash Thanks for taking the time to explain your ideas on valuation. I too have a hard time buying high price/sales companies, no matter how good they are as they eventually have to come down to reality. If they are tiny, then it is not that big a deal, but when they get to be the size of Maxim I start to wonder. As for cash on the books and how to value it- Why not consider it as an annuity that uses the 10 yr note for the interest component and perhaps a 10 or 20 year repayment for the annuity? This will give you a cash flow going forward that you can use in your discount model. I believe companies use "cost of capital" when looking at ideas and their goal is to get returns in excess of the cost of capital. This used to be about 15% but could be lower these days (12% ?) which explains why many good companies I own (LRCX and Agilent) that had low or zero debt went out and got more dept late last year when rates were very, very low. Their goals are easier to meet with lower interest rates on their capital. Kirk

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