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

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

LRCX 139.60

-6.2%

3:59 PM EST

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To: shane forbes who wrote (5212)	4/25/1998 9:23:00 AM
From: Jay M. Harris	Read Replies (5) of 10921

To all Semi Bulls and Bears. I have not had the time to keep up with SI posts the last couple of quarters. I just wanted to stop by and update this thread on recent events that should play out over cal 1998. 1) Intel is now at .25 micron on all wafer starts. This doubles the chips per wafer from .35. Consequently, INTC requires NO incremental capacity to drive YOY unit growth 100% in Micros. The problem is that end markets are slowing to approximately 12% YOY growth for cal 1998. As a result, prices for micros are falling faster than Moores law cost saves, and margins are declining. This will continue (excess supply and lost share in the low end). 2) PC market segmentation (sub $1000) is commoditizing the chip sets in this important new growth market (37% of new units vs 5% last year). The internet is the true new killer app Not Moores Law. Consequently, internet functionality is limited by bandwidth NOT Micros. As a result, Sub $1,000s will be Sub $500s within 12 months and these consumers will have access to 90% of the functionality of P-450s as the internet fulfills their needs (information access). Intel is losing share in the low end and this will gradually continue as tier 1 PC OEMs compete for share aggressively based on price to offset the slower industry unit growth rate caused by SEA and Japan. Blood MUST flow in cap equipment land because Moores Law is doubling chip output while 45% of semi consumption ( PCs) are requiring fewer chipsets in sub $1,000s.( These are currently the highest growing units by a wide margin). We are only beginning to see the fundamentals described above manifest themselves in company earnings reports. This industry will not recover in 1998 as I previously thought. There are secular problems deeply rooted in other aspects of the New build to order PC movement and reduced inventory cycle times at PC OEMs just to survive. I currently don't have the time to become actively involved in SI correspondence. I will post on this thread once memory prices recover as to an appropriate cycle entry point. I now suspect this will be sometime during the beginning of cal 1999. In the meantime there is excellent fundamental momentum in networking and software land. i.e. MSFT $125 target; RATL $30 target; CSCO $90 target; ASND $60 target; NN $50 target to name a few. These are 18 month targets. Regards to all and good luck, Jay

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