Lone, it's no doubt that AMAT is going to meet or exceed earnings this quarter, but what do you think about the backlog level and potential pushouts due to the DRAM situation as we go into 1998. .25u, 300mm, Cu and low k....are still R&D technologies which will generate little revenues for AMAT in 1998, compared to the production tool sales.
I agree that FABs need to keep investing in new technology in downturns. Unfortunately, the spending is significantly cut back, this is why we have downturns. If everyone kept investing at the same level, then we would never have downturns ...FABs spend enough to keep on top of new technology and tools so that they don't fall behind and when the upturn comes they have the bugs worked out to expand rapidly with these new technologies. So the level of spending is significantly reduced in chip downturns.
In my opinion, when FABs think that they are heading into a upturn in chip sales they want to be the first to order the tools so that they do not get stuck in the backlog which would delay their expanision plans. This results in a busrt of orders and activity. Which makes it look like we are heading for another 3 year up cycle. If however, the expected chip price upturn does not follow then the orders are curtailed and pushouts are experienced. As you said in your post.... "We cam out of it with DRAM and some other commodity chips pricing still depressed and that has only gotten worse recently So the excesses of the last upturn weren't shaken out."
So the key in Nov's earnings release is going to be the backlog number and forward looking statements.....recently, KLIC, who's business was booming with no end in sight, announced that they will miss their earning. This is not a sign of the beginning of a 3 year up cycle, it's almost like 1995 when KLIC was the first to announce missed earnigs estimates and signaled the downturn. Remember, KLIC wire bonding tools are part of the chip making process and if their sales are slowing, then logic would have it that all the tool required before the wire bonding process should be slowing too.
It seems that PC's growth has slowed based on the chip sales by INTC....this may change this quarter, but INTC's MP sales were sequentially flat for 2 quarters. DELL and CPQ are kicking butt by stealing market share, however the others are hurting.
Again, I agree with you that, in the long term AMAT is a good buy at the current high prices, the only question now is ..... in the next year will you be able to pick up AMAT at significatly lower prices?
PS. I still think that you guys should buy TRKN for their MORI and low-k technology.
dave |
