Misc comments on AMAT CC -
Overall, there really wasn't anything new that hadn't been brought out in last months CC cycle. B2B greater than 1, Revenues flat for Q2, utilization of advanced technology in the 80 to 90% range.
...What I didn't hear was any comments about whether the order surge in January was continuing. Also, Morgan's comments about a second half recovery was pretty vague - "We hope...".
Side note - Very strange that I didn't hear any comments about SAB101 effects. Nor can I find evidence of deferred revenues in the balance sheet. Anybody know what's going on with that?
Cap Ex reduction vs revenue growth. I don't have a problem believing that Cap Ex can shrink this year while revenues grow during the year. Because last years Cap Ex was inflated by the 2000 run-up. Consider AMAT's data from the last three years -
1998:
New orders.........$1,362....$1,097......$679....$742....$3,880
Net sales..........$1,376....$1,238......$955....$761....$4,330
1999:
New orders.........$1,058....$1,461....$1,514....$1,688....$5,721
Net sales............$821....$1,171....$1,491....$1,613....$5,096
2000:
New orders.........$2,454....$2,928....$3,275....$3,601....$12,258
Net sales..........$1,722....$2,190....$2,732....$2,920....$9,564
2001:
New orders.........$2,430....$1,353....$1,208....$1,106....$6,097
Net sales..........$2,363....$2,139....$1,576....$1,265....$7,343
Notice how the order boom in late 2000 kept the revenue up in 01. Even with a 25% reduction in cap ex over last year the revenue would come in at 5.5 bil - ahead of the '99 number (which justified a $60 AMAT price albeit with a better cost structure?).
...But if you work the numbers you find that the quarterly average run rate would be 1.4 bil. Now Q1 is at 1 bil, Q2 is expected at 1 bil. That means that the second half numbers willl need to average about 1.7 - 1.8 bil/quarter. So a 75% surge in revenues by the end of the year FROM WHERE WE ARE TODAY.
CAVEAT - I believe that these numbers are somewhat inflated - the SEMI numbers give a number more like 30% for the second half. Still - as long as the recovery stays on track, we are looking at a good run going into '03.
And the better news is that, all things considered, the odds favor an upside to cap ex rather than a downside. As for timing - we probably won't get confirmation of the strength of the upward trend for another quarter so there will still be buying opportunities.
...I expect the semi equips to remain in a trading range until the end of March. I sold 2/3rd of my semi equip holdings this morning in anticipation of downward pressure going into the triple witching on Friday. With the equivalent of 2 bill shares of Feb 45 calls and the equivalent size for the 45 puts, somebody is going to be motivated to bring the price down. |
