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Politics : Formerly About Applied Materials
AMAT 225.18-1.5%3:59 PM EST
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To: EACarl who wrote (28729)3/2/1999 4:56:00 PM
From: Proud_Infidel  Read Replies (3) of 70976
 
EACarl,

Re: AMAT's "Overvaluation"

I would argue that AMAT is still woefully undervalued. We are currently witnessing a shift in power in the tech arena. It is clear in my mind that even if MSFT wins, their past patterns of behavior will have to change. And I would further make the argument that the govt. will split up the company since I am not sure if there has ever been a company in the history of the world with net margins in excess of 40%. This is their "bloody glove."

INTC is currently under the gun also. On all sides, from the FTC, from Privacy Groups over the PIII, from AMD eating some of its lunch, and eroding ASP's as consumers want cheaper computers. INTC is still the 800lb gorilla, but it was once the 1000lb gorilla.

AMAT holds the position of being the dominant force in an oligopoly with tremendous barriers to entry. 6X sales is less expensive by far than either MSFT or INTC, yet AMAT should see EPS growth in the coming years greater than either of these without the encroachment of either competitors or the govt(knocking on wood). In fact in AMAT's case it is just the opposite- they have been taking share in nearly every category they compete in. And it should be noted that the 6X sales is using trough valuation measures, unfaire for a company in a deeply cyclical business. AMAT once was a acolyte in CMP- they now dominate. They built up their cash position to nearly $2B while virtually every other company was losing money. They provide the enabling technologies that nobody else can, and hold the key to the 21st Century and beyond. You don't think this deserves a premium?

BK
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