Novellus Message Board - Msg: 8669829

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Technology Stocks : Novellus

NVLS 2.400

+2.1%

Jul 24 5:00 PM EST

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To: Dave Chanoux who wrote (2101)	4/2/1999 6:32:00 AM
From: Duker	Read Replies (1) of 3813

Signs that the business is contributing are pretty fuzzy. Was the Varian purchase too big a bite for the management team. What would they do with Lam, leave it autonomous? I think these are great questions ... and I am glad that I did not buy the converts on the deal ... or the stock for that matter! I think that NVLS spent the better part of the last mini-recovery trying to fix VAR TF. I can guarantee that Bagley has LRCX in as good a fighting shape as you can be at this point in the cycle. I understand fully your skepticism: the numbers are awful right now ... it is all on the come ... and you could probably care less if LRCX makes it to break-even exiting the June Quarter or does so in mid-to-early May. TERES (their CMP tool), may or may not play out ... the ERP integration is not complete ... the questions go on and on ... One thing that you can say about LRCX: they have restructured the operations to the point were they have cut $60mm in operating expenses (on 40mm shares) ... It is very lean, with a ton of operating leverage ... probably could not say the same for Varian TF ... On your autonomy question: That is the rub. I do not know what you do with the LRCX management team if you do not leave it as an autonomous unit (is semi-autonomous even possible?). These guys/gals are good. Bagley, Newberry, Johnson are all really first rate ... this goes throughout the organization ... into sales (I forget the ex-AMAT Japan guys name) ... and down to the IR person (Kathleen Bela). This is the real issue ... I can not imagine that there would not be cuts and I am not sure that LRCX is willing to do that before they have been given a chance to demonstrate their ability to achieve their operating model. If you leave it as an autonomous unit ... why do the deal? Share R&D, Marketing, and centralize the Finance/Legal/HR stuff? I do not know ... The synthetic lease is described in the 10-K (not sure of the page number). It is basically a way to build and develop a property using very little of the developer's capital (RE company) and the company's capital ... you actually use a third party's balance sheet (usually a AA plus type credit ... big insurance company like AXA ...) ... There is a great web site somewhere out there that describes it (that is where I read about it ... I do not know the link ... I also have a family member in "the RE business" who thinks they are the perfect fit for any technology company ... (says he) "Why do these morons feel the need to own their own buildings (SUNW, ORCL, etc.) ... that isn't their business ... why invest in RE if you do not have to?" The speculation about the merger is pretty interesting ... though I am not certain that it goes beyond speculation for some time. --Duker

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