To All on the thread: Here is my proposed editorial letter to Barrons Mailbag in response to Fleckenstein's comments. Those of you who have been serious participants on this thread are welcome to make critical remarks and/or suggestions. I may or may not use them, but would definitely like to see them. Here goes:
Battered and Bearish
I would like to reply to William Fleckenstein's off-hand remarks about Cymer Inc. The source of the information for his disparaging comments about Cymer and "a competitor" seem to be a brief by an analyst out of Smith Barney's Tokyo office named Chuck Goto. That brief in itself is of dubious quality and looks very much like it was written by Komatsu, the competitor not mentioned in Fleckenstein's comment. Members of the Cymer thread at Silicon Investor have investigated every single facet of that report and found it to contain no truth whatsoever. Furthermore, Cymer doesn't make "bulbs" but rather complicated deep ultraviolet lasers and their tools which are at the heart of the stepper process of etching lines on silicon chips, and the next generation of chips will have line widths of .25 microns or less, which is what these lasers are capable of producing and is where the semiconductor industry is now heading at full speed. It is even questionable how much the turmoil in Asia will slow down demand for this product, since chip manufacturers cannot afford to be left producing chips that nobody wants.
In addition, the stock price has been hammered in the last two months not by anything to do with competition, but rather by one order pushout, the PR of which was not handled very well, followed by a series of three to four rumors, all of which were denied by management and have since proved untrue (see the recent the Donaldson-Lufkin- Jenrette upgrade). For more tangible evidence, see the October 23 earnings release in which the company beat downward revised estimates, and the post release conference call wherein management reported that the next two quarters at least will see significant order increases. The share price will either increase as analysts revise their estimates upward to include this information, or increase when the quarterly earnings come in with positive upside surprises. Either way, the share price is headed North, not South. I happen to believe that factual information does find its way into the stock price eventually. Mr. Fleckenstein's information is inaccurate, his assertions are unfounded, and those who follow his from-the-hip tips will have him to thank. I am long Cymer, but that is not the issue here. The presentation of factual material by which investors can make informed decisions is the issue.
Dr. Jess C. Beltz
Department of Finance
The Hong Kong University of
Science and Technology. |
