Cary and Zev,
I guess I tend to believe that Cary's scenario is correct on the 2-5yr scale, which makes it an excellent basis for investment. However, Zev's comments on CURRENT valuation are equally compelling.
My fear is not that the long term story will be affected greatly, but the likelihood of a mild recovery seems high. The inventories from 2000-2001 are being worked off by AMAT's customers' customers and orders will have to flow as that occurs. However, the orders will only go to equilibrium with current demand, which is probably only a fraction of previous demand due to general over capacity in critical industries (esp. telecom). Trouble is, the upward ramp from the LOW order levels of the inventory correction to the level of low (?) current demand seems easy to confuse with a ramp to previous demand highs (Zev's point, I think). Since so much of the cycle mentality of semi-equip investing is focused on demand turning up, few investors (read: speculators) are going to wait to see just how strong such a ramp will be. That doesn't mean that a recovery in semi-equip shares isn't warranted or that the long term ramp isn't somewhat guaranteed (obsolescence and general chip volume grown are powerful), but it may well mean that the semi-equip shares will get (have gotten) ahead of themselves in 2002.
Of course, I'm not quantifying any of this but am interested in how it could be quantified b/c I believe semi-equips have the some of the best business potential in the technology universe. Also, as a matter of disclosure, note that I work in the telecom-equip business and, therefore, may well be more pessimistic about the recovery than I should be. |
