Lam Research (LRCX, NASDAQ): To the Insiders Message Board

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Technology Stocks : Lam Research (LRCX, NASDAQ): To the Insiders

LRCX 160.81

+1.1%

12:54 PM EST

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To: Kevin J. Koons who wrote (2784)	4/24/1999 7:19:00 AM
From: Duker	Read Replies (2) of 5867

I think the some of the most exciting things to hear from the call are: 1) Beyond the June quarter, LRCX will move through some high priced inventory/materials ... this, coupled with a couple of hundred basis points of period expenses, gets you up to 5% in additional GM ... assuming pricing gets a bit better ... and with backlogs building to 5+ months ... we can hope/expect pricing to improve ... this flows on down ... 2) The quarterly run rate of $250mm can be achieved without CMP ... with CMP (and this is a BIG if) CY2000 can have an incremental $50mm, $100mm, $150mm ??? of revenue ... revenue that carries with it a much higher than corporate average GM ... 3) OpExpenses only grow from 8-10% above the current level. There ability to do this would make points 1) & 2) all worth it. The success of the ERP system installation and the assumption that 300mm spending is "adequate" are pivotal here. If the latter becomes an issue, the offset is that the 300mm is closer than we think and this would be good for everyone -- in spite of the additional RD&E dollars. 4) Bagley talking seriously about 45% margins. 5) A $250mm backlog. Steve N. must be happy to finally have something with which to work. 6) Strong orders. 7) Expect higher than a dime for next quarter. Using the flat GM assumption is probably conservative. Not using the 43.2mm share and equivalent count adds another penny by itself. The MoGuys will be excited to see positive EPS new (i.e., positive EPS with a surprise on the upside). The last point is almost meaningless, but it could help to "pull forward" the logical valuation for LRCX, which is at least in the mid-$60's given what we know or think we know about CMP and the sustainability of the recovery ... as the recovery manifests itself and/or TERES actually becomes a real, revenue generating product, the numbers go up from there ... but, mid-$60's seems good for the next few months (or until the "unanswereds get answered") ... Overall, things seem good. I need to fill in some holes and get some clarifications on some issues ... so that is my random first-pass ... --Duker

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