Brian,
I think I remember you and many others bullish on this group at 3 and 4X revenue, please correct me if I'm wrong. The group's valuation is beginning to reflect down cycle fundamentals and many on this thread are bearish. My sense is that we are approaching the bottom of the cycle. However, my sense has not been confirmed by an uptick in memory prices. Consequently, I remain patient with new money.
Brian, your perspective might have credibility had SFAM and IPEC been the only Cap equips with fundamentals rolling over. The entire industry is rolling over, because we are in the midst of a very difficult downturn. (Sub $1,000 PCs ; Build to order direct model ;Pacific Rim Depression ; and excess capacity). All of these factors will evolve into a cyclical upturn for the equips sometime during 1999. IPEC & SFAM should easily trade at 3X revenue in an upturn over the subsequent 24 month period.
Yes it is true that AMAT takes share during cyclical downturns. This is not new! However, the CMP process should have more of a V shape recovery when the equipment recovery occurs allowing all vendors to prosper.
This is because relatively few memory makers use CMP in production and the complexity of logic requires more CMP process steps (Moores Law).
While a merger between IPEC and SFAM would create synergy, it is not required for either company to command 3X revenue in a cyclical upturn. I will refrain from taking the threads time on macro cycle dynamics. However, I want to assure those who participate in these companies the AMAT will not be the only CMP shop in town. I honestly don't know what kind of CAGR to place on IPEC or SFAM. My sense is that it will be twice that of the equipment sector at large off a small base due to the currently dismal rate of penetration. CMP process adoption has head faked everyone because of the dismal industry fundamentals described above.
My final words on this subject to engineers with hard earned capital at risk is to not let share price, or emotions (herd mentality) influence your conviction. Stay the course if your currently CMPing and if not, I will post over the next quarter or so when I buy 50% IPEC & 50% SFAM.
Hope this helps and good luck,
Jay |
