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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 154.10-4.5%1:07 PM EST
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To: Clarksterh who wrote (4285)1/2/1998 9:11:00 PM
From: Jay M. Harris  Read Replies (3) of 10921
 
Clark, since we are in continual disagreement :) , I have more fodder for the dialogue. Jay Deahna at Morgan Stanley is currently modeling $900 million in cap ex for Micron Technology for cal 1998. The $700 mil announced by Micron is an example of a 22% negative varience from street expectations for cal 98 cap ex from MU, and subsequent equip EPS estimate reductions.

Clark, this is only one company in his model of 31. I follow several other semis on his model that are currently worried big time about the pricing situation. Frankly, they are like the rest of us guessing what is going to happen on the pricing front, EXCEPT, they are living it first hand, are losing money, and are scared as H**L about demand for chips and pricing from Pac Rim capacity. This is not the environment for Wall Street analyst to leave their Pre-DRAM implosion estimates dangling in the wind.

While you demonstrate growth for MU in cap ex from $517 in '97 to $700 mil in '98, the $700 mil figure is not what equipment analyst were modeling. Moreover, my main point is that MU is a single company in Morgan Stanley's model of 31. I mentioned MU because they are the global low cost provider and were mentioned in the article.

You had better believe that if MU is cutting back(lowest cost provider), and Morgan has yet to adjust the model, then Mogan Stanley and many other Sell Side houses' models are at risk. Consequently, more downside to equip valuations over the next 6 months.

Jay
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