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Politics : Formerly About Applied Materials

AMAT 322.51

+6.1%

Feb 6 9:30 AM EST

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To: davesd who wrote (8976)	10/19/1997 5:17:00 PM
From: Proud_Infidel	of 70976

Dave, Re: Morgan and CC Highlights He was VERY bullish in the last CC(at least I thought so) and has intimated a number of times that he does not believe the stock price adequately reflects reality. KIM that he is great at the expectations game. IMO he would not like to see the price bid up to "bubble" levels; this could only lead to disappointment down the road. However, AMAT fell 20%+ in the past week and is valued at approx. 16X FY98 using EPS of $2.5(the current high end) MSFT, on the other hand is valued at apprx. 38X FY98 EPS yet is expected to grow at a slower rate over the next five years and is facing competition for the first time which could eat into its revs, margins etc.(the growth rate projections I have seen are 25% for MSFT vs. 30%+ for AMAT) And even with this seemingly obvious overvaluation of MSFT, it managed to fall only 1.5 points in a bloodbath on the NAZ on Friday. And yet, AMAT is the leader in an oligopoly, something which IMO in and of itself renders it a higher P/E. Anyone with a good idea and some programming knowledge can cut in on MSFT's territory a la Marc Andreeson, Larry Ellison etc. etc. AMAT's business however, has immense barriers to entry. Imagine trying to start a company creating etching machines that cut down to .18 microns!!!! The physics alone are mind-boggling. However, something that goes hand in hand with this is the ability to maintain these machines with a worldwide support team. I am simply trying to make a point that the market is not yet to the point of overvaluation or anywhere near it on AMAT. It is trading at 1/2 its growth rate for FY98(i.e. P/E=16.5 Growth Rate~30%+) These stocks are notoriously volatile but that fact is aggrandized when you have people misinterpreting numbers such as September's BTB, a number which was the highest in recorded history. I will paraphrase what JM said in the Fortune article:"What value do you give to a company which is the backbone of life as we know it." Regards, Brian

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