Semi-Equips - Buy when BLOOD is running in the streets! Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!

LRCX 145.66

-1.2%

11:36 AM EST

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Ian@SI who wrote (4180)	12/29/1997 1:54:00 PM
From: Jay M. Harris	Read Replies (2) of 10921

Ian, My recent post contrasts the most recent semi equipment cycle (1996) with the current according to the bulls (yet to be confirmed cycle) or uncertainty. I also provide current macro underpinnings that are providing additional uncertainty today, that did not exist only 18 months ago. While equips traded to 1X revenue in prior cycles, I referenced the 96 cycle for the same reason you mentioned in your post; that we're in a completely different global economy and semi industry. You will find that the most recent equipment meltdown in 1997 closely resembles 1996 because we are not in an economic recession and end market demand is growing nicely.This has not been the case in a previous semi cycle except 1996! Incidently, I included 100% bit growth in demand for commodity parts for 1998 which approximated YOY bit growth in 1996 when the group traded to 1X revenue. Ian, while things change constantly in semi land, I could fill up several posts with why this is only a continuation of the 96 cycle that never really transpired fundamentally due to Asian economys reducing production without taking capacity out of the industry. The Koreans openly stated that they were reducing production in 1996 yet equipment spending was funded with debt well in excess of 21% of their national semi chip annual revenue. This created a "false start" rebound in DRAM prices that allowed several Fabs to remain in business. Currently, the memory capacity purchased in 1997 is only now beginning to come on line with rapid design shrinks and migration to 8" wafers vastly increasing silicon surface area and driving down costs. When I speak with equipment company IR folks, I ask how significantly Moores Law effects supply in the commodity component segments of semi land? The truth is that not many people including myself know! It is often so quiet on the other end of the phone you can hear a Pin Drop and I don't believe our bank uses US Sprint for long distance. Several posters commented that AMAT is standing by their EPS guidence to the street of concensus EPS estimates for this fiscal year. This is not new! The same thing happened during the 96 cycle when book to bill ratios only began to roll over. This is exactly what should happen at cycle peaks. Equips report peak cycle earnings. Frankly, AMAT will probably hit their numbers for 1 or 2 more quarters. Yet the stock will not perform well. This is because the market is already discounting the second half of 1998 which is currently beyond AMAT's visibility with only a 6 month firm backlog. In closing, another thing 1996 tought the equips is that "firm backlogs" are not very firm when the semi group inventories begin to swell. They are currently up 12% domestically as of the end of calendar q3 and probably more in asia. We shall see what q4 holds? Hope this helps, Jay

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next