Don; we are clearly approaching the bottom of this semi cycle. Emotions are running very high, CFAs; MBAs; corporate CEOs; and web techno nerds are in full fledged panick. The next quarter will produce full fledged blood letting in earnings reports all over cap equipment land. Applied will continue to take share from IPEC & SFAM over the next 2 quarters. I truely think I will be picking up AMAT @ $20. over the next 2 quarters just as the market participants described above are ready to slice their wrists. "Blood will be running in the streets" and this will be an incredible opportunity for the experienced battle hardened investor with a 24 month time horizon.
IPEC & SFAM will triple from current prices over the ensuing 36 month period. Frankly, all cap equips positioned for .18 micron & 300 mm will triple from current prices.
This post is NOT intended to persuade members on this thread to buy now! I will post when memory prices begin to recover. (They are still falling)! This post is intended to inform current SFAM holders that the world has not come to an end. In fact, in the networking sector(25% of semi consumption; ASICs & ASSPs are increasing as a percentage of system and switch sub-assembly, hence, greater future demand for semis. Also, the PC OEM move to the direct model should be well underway by years end with inventories in the channel much lower, causing increased component ordering. Finally, NT 5.0 kicks off in the second half of cal 99 requiring pentium IIs with 400 MHZ units requiring much higher semi content per unit.
What are the current problems reflected in todays prices?
#1) Overcapacity of equipment. Solution= Moores Law requiring old equipment (capacity) to come off line! Equipment has a 36 month life expectancy. This has just begun as droves of Companies are exiting the DRAM market.
#2) Slowing PC growth rate from a 15.5% 1997 CAGR to a 12% 1998 CAGR (source= IDC). Solution= recovery in Japan and NT 5.0 corporate upgrade. Also, seasonal uptick in late q3 and q4 causing PC inventory to clear in the channel by cal q4 1998.
#3) Pacific Rim currency collapse reducing foreign clients ability to finance equipment. This is the biggest risk in my opinion. I have heard
things are getting worse not better in the pacific rim economies.Solution= Japan had better get a grip soon and print some damn money and close some lousy banks! If Hong Kong devalues :( all bets are off, because China will devalue and wall street will run for the cap equipment hills.
This will allow me to get my AMAT for $20. :)
Hang in there folks, contrary to popular belief, time is on your side...
Good Luck,
Jay |
