Brian...for the 2nd ot 3rd time you have brought this up..."Where were you when the stock was $54??"....I was here saying the same things as I am saying now...take some time and go back in the thread to before AMAT was still above $50. So lets just drop that one. Plus it dosen't matter when I started to post, I feel that I have some valid issues that I need addressed before I buy more semi cap stocks. So convince me I'm wrong and I will load up with semi cap stocks.
Hong Kong probably dosen't buy a dime's worth of equipment from AMAT. There are not in the chip manufacturing business. But Hong Kong is a big financial presence in Asia and what goes on there can impact the other countries in the area financially...so it's an indirect impact but a real one. However, this is not my main reason for being bearish.
I have stated several times in numerous posts why I'm bearish, you seem to ignore them or forget them. In a (big) nutshell...
1. There is over capacity in the Fabs, you may hear of a fab here or there that is running 90%. But as a whole the industry is in a state of overcapacity. And my main reason for saying that is that, margins on almost all chips are going down faster than they should.
2. The PC industry's growth is nothing to write home about, 16% unit growth is at the low end of estimates. And this in a good economy with PC's priced in the $1,000 range. As you know PC's make up a big part of the chip industry.
3. The "big" conversion to 300mm is not happening till after the year 2000. I think investors are expecting it to happen alot sooner. Plus I think there will be a transition slowdown while Fabs workout 300mm technology bugs and yield problems. As they get closer to moving to 300mm, they will probably cut back 200mmm purchases. As has been stated..no one whats to build the last 200mm fab.
4. All these predictions of "huge" chip growth have been tossed out before. 1997 was supposed to be the big year with growth in the mid teens, now it's revised to 5.5%. These guys who make predictions get their numbers from chip companies who are making optomistic projections....Who would have projected that INTC would have 3 flat quarters this year, until it happened. So I don't have too much faith in the projection numbers. Plus, there is a big IF in the current projections....IF the DRAM prices recover! I really doubt that is going to happen in 1998. Especially if FABs keep expanding at the rate you think they are.
5 About tool orders still coming in....once you commit to a FAB and start ordering tools, you get to a point that there is no turning back no matter what....If a fab has bought 60% of the tools needed in a manufacturing line....they need to get the other 40% or else the 60% will sit idle gathering dust. I suspect we will see orders slowing in the next few months. If LRCX is seeing all this activity, how come their quarter was flat and the current quarter is expected to be flat? plus their bookings were flat.
6 The semi tool companies may still see things as rosy...but the chip industry that uses their tools is not that rosy. Margins are eroding, so either demand is droping or there is overcapacity....I think we are seeing both. Sooner or later this will trickle down to the semi tool companies. All the DRAM fabs are losing money at current prices, and even almighty INTC is going to have year over year lower Q4 earnings.
7 the currency issue is just another problem to add to the list.
Chips are the future and we will need more fabs and the fabs will go to 300mm and .18u...no doubt about it....and AMAT will most likely be king of the hill.....but all I'm saying is that based on the above, I don't think it's going to happen next year.
The 1998 estimates for AMAT are just that..estimates. I have seen many companies make and miss analysts optomistic estimates because the business climate changed....Estimates are good only if everything works as the analysts expected it. Unfortunately, things don't always work that way. MU was supposed to make $17 per share and INTC was supposed to have another great year.....oh well.
No doubt that AMAT will make or exceed this quarter, it's the next 3 months that worries me.
dave |
