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Technology Stocks : Semi Equipment Analysis

SOXX 309.40

+1.0%

4:00 PM EST

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To: Donald Wennerstrom who wrote (3109)	5/13/2002 9:56:57 PM
From: Return to Sender	Read Replies (3) of 95526

Don put me on record as being in the camp that expects the market to under perform over the summer months. If I saw signs outside of the semiconductor industry that a recovery was underway I would feel differently. As it is AMAT may beat expectations, they may even up guidance, but the move higher may be very short term in nature. Why? Because we simply do not have a broad based business recovery. Outside of the semiconductor industry where do you see any signs of a technological business recovery? There is no real sign of a strong business recovery. Oh it will come but perhaps not until later this year or early 2003. Demand is not high enough now even where we were seeing previous strength. Take DRAM for instance. DRAM prices are falling. Higher DRAM prices were in large part responsible for the previous monthly increases in the btb. How about CPU's? The desktop market has slowed. Notebooks are selling well but it is not enough. Yes, I know there are many other technological areas that were previously considered growth areas. The server and storage markets are down. The IT market is showing no signs of picking back up. Software sales are questionable at best. On top of all this bad news is that this the way earnings are going to be reported is changing. Stock options will be considered an expense. Valuations which are already traditionally high just got higher based on this change alone. Oh sure there are still some growth areas but consider the DVD chip market. Higher sales and continual upward guidance does not guarantee high price multiples. ESST is a great example. Is it not possible that AMAT has been getting a great deal of its business from customers based on consumer product demand alone? Perhaps but that too will be questioned. There are rumors of MU delaying orders. INTC is not going to admit to upping their capex until they see improving prospects. It will happen but will it happen this summer? I doubt it. The SOX could rally back higher in the short term. It probably will but longer term I now believe we could test the September 2001 lows. Of course my being scared to be long could be the single best reason to be long. RtS

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