<<Common Brian, you know as well as I do that AMAT has no product that
is far above it's peers in any area. It is simply that they offer a "one stop shopping" approach that no one else has right now. For example NVLS is better in CVD. It's not that AMAT is better, just bigger.>>
But is NVLS better in HDP CVD? Intel didn't think so.
Oh, yeah, right. Leaders/Guerillas need to have the best product to be category killers ... Like MSFT ... that Win98 is great ... much better than anything anyone else could have made ... a CSCO router is so much more effective than anyone else's ... the shopping experience at HomeDepot is so much better than Lowe's or your local ACE ... MCD has much better burgers than the guy at the Hamburger Shack ... DELL builds much better computers than you could build on you own ... Fidelity's performance is much better than little boutiques like Ruane, Cunniff or Southeastern Asset Management or Chieftain ... Trojan makes a much better condom than anyone else ... That new Oral-B $5 toothbrush from our friends at G is really much better than using tree bark ...
I'll stop.
AMAT, to be technically equal (roughly) ... with a broad array of products ... with field service organization that is a multiple of its competitors ... with development resources (e.g., EPIC) that are an order of magnitude greater than its competitors ... with a balance sheet that has more cash than the market caps of most of the competition (with which it can develop new products like CMP and/or finance receivables in a more efficient/lower cost manner) ...
Is the price right here? I do not know. Nor do you. We just assimilate information, make assumptions, and try to remain reasonably intelligent regarding the "goings on" in the industry. I for one, can neither design nor turn-on one of these tools. But, I will say that the nature of any past recovery is only a clue, no more, to this recovery. Capacity added in 1995 is fast reaching the point of uselessness for a reasonable number of companies. AMAT will probably be around through the next recovery cycle. In the battle for slots and the coming battle to fill the lanes of the Bowling Alleys (sorry, had to use it!), AMAT will get its fair share of business. Does that mean it earns $2 in the next cycle or $7?
Finally, if I bought the stock at $25 and ... been a "genius" and sold at $70 ... I would have had a net gain after tax (use 39.6%) of $52-ish and I would not own a great company in a business that is demonstrating the early signals of a meaningful recovery.
For full disclosure, AMAT is my second largest position ... my largest (2.5x's as large as the 2nd) is LRCX ... My single most optimistic, long term hope/prayer for LRCX is that Bagley creates an organization and a company with capabilities that are 50% of AMAT's ... Is LRCX cheaper than AMAT ... yes, in my opinion ... Does it deserve to be. Yes, absolutely ... until they can demonstrate a more AMAT-like business model and more AMAT-like execution.
--Duker
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