Jay,
Lehman's view for 1998, FWIW.
Ian.
++++++++++++++++++++++++++++++
* With 4Q EPS reports from Intel and Motorola, we now have updated U.S. capital spending numbers. The U.S. chip manufacturers we survey plan to spend 19% more in '98 vs. '97. This brings worldwide spending to -1% for '98.
* Intel (INTC, $76 15/16, Rated 2 by Michael Gumport) plans to spend $4.6 bill., up 2% for 98, excl. the purchase of Digital Equipment's plant. If the Digital Equipment purchase does not go through, Intel will spend $5.3 bill.
* Motorola (MOT, $57 1/2, Rated 1 by Todd Koffman) has spending pegged at $2.5 bill. for 1998, up from $1.2 bill. in 1997. The 1997 level was the lowest in years; the $2.5 bill. will nearly match the 1995 peak level.
* The U.S. spending numbers are strong enough to largely offset an anticipated 36% decline in South Korea and an 11% decline in Japan, including currency. Our previous analysis concluded that worldwide spending would drop 4% in 1998.
* The important issue for 1998 will be spending mix. A larger percentage will be spent on equipment versus buildings. Of the equipment purchased, the mix should shift heavily to 0.25 micron equipment.
Highlights:
1. The key beneficiaries of 0.25 micron technology. Applied Materials (AMAT, $29 15/16, Rated 1); KLA-Tencor (KLAC, $38 5/16, Rated 1); Etec Systems (ETEC, $40 3/8, Rated 1); SpeedFam (SFAM, $26 1/8, Rated 1); PRI Automation (PRIA, $26 7/32, Rated 1).
2. Relative advantages. Asian equipment companies will have the currency translation advantage over U.S. equipment companies. But the U.S. equipment companies have strong relationships with U.S. chip manufacturers, which will represent a larger share of total spending in 1998. |
