Skeeter et. al.,
Welcome back Skeeter.
I would like to reiterate my response to the following statement by BK.
Cannot wait to hear the CC tonight. If JM can ameliorate the fears of the analysts regarding a 2H slowdown, it's off to the races.
I am pretty sure that he is going to have difficulty doing that ... as it stands, some of the sell side guys (Elliot Rodgers, et. al.) are advising their clients to sell into the good quarter ... arguing like SSB that DRAM prices will screw up the late this year, early next year.
I do not think that this is wise ... just what I have been hearing.
I think that JM could sway 'em ... but, "they" are typically difficult to sway (as they do not think ... they just act).
Love the webcast.
--Duker
So, where are we today?
The short-term selling pressure of the institutions who follow the advice of the Elliott Rodgers(es) of the world gives you a day like today. Everyone expects so much more from AMAT. Unfortunately, the mechanics of this business can really screw up the short-term price movements in any stock.
Let's look at the impact that the sell-side can have on the buy-side:
You have a guy like Elliott at CSFirstBoston ... you know, the CSFB Tech Gurus ... the old DMG Mercenaries (prior to that, the Morgan Stanley Tech Team ... though Elliot was with Cowen ... now SG Cowen) ...
Elliott is always a competitor on the Institutional Investor All Star Research Team. Yesterday, he was telling his clients that they should sell AMAT into the strong quarter because the outlook for DRAM and CY99 4Q & CY00 1Q is cloudy (No feces ... when has AMAT ever had any clarity beyond the next 5 months? The only time is at the absolute top of the cycle when they go through the "it is different this time scenario" ... a clear sell signal!).
The rationale for his call to his big clients notwithstanding, there are a bunch of undercurrents here:
First, Elliott (along with many other sell-side guys) missed the last downturn in a big way after the 1997 spike (some say recovery). He basically told his clients to buy when they should have been selling and sell when they should have been buying (or, more accurately, stay away from the group when they should have been buying).
Second, it is Institutional Investor All Star Research Team voting season. This is when the buy-side industry analysts and portfolio managers vote for their favorite sell-side research analysts.
This is not a trivial event for the sell-side folks. Elliott R. at CSFB wants to beat Gunnar Miller at Goldman. He wants to be on the first team ... not the runner-up. Why? Salary and personality.
The cache of being the "#1 Institutional Investor" is tremendous and winning the competition bring riches and praise for the sell-side analyst. It is the equivalent of being named a League MVP in baseball. People have incentives built into their contracts that reward them for attaining this designation. Layer on top of that the fact that Elliott and Gunnar are very smart and competitive people who want to win in general, and you get a pretty heated competition.
Third, with the competition heating up ... Elliott needs to differentiate his product (i.e., his "value-added" opinion on the group and its biggest component). So, sell into strength and take some profits ... and, by the way, remember where to cast your vote!This would also go a long way in explaining why MB at SSB came out the day before the quarterly conference call and downgraded AMAT ... a high risk/high reward strategy ... if he is right, he is the only guy who made the call ... if he is wrong, he becomes the point of a few jokes.
Fourth, (away from the Sell-Side X-Files) the Market can't discount squat in the short-term. I will never argue that AMAT is cheap in the $60's ... but, I would have never thought that AMAT could have increased sales 51% sequentially ... in a volatile business where the visibility beyond one quarter is effectively zero ... people make stupid guesses.
Who, four weeks ago, would have pinned AMAT's next quarter at $.50 to $.54 ... with higher operating expenses?
So ... here we stand ... more an more noise and no closer to knowing the magnitude or duration of the recovery.
I can only firmly say this: AMAT is an incredible company (financial strength, critical mass, marketing skill, improving operating prowess ...) in a business that should grow very well over the next several years.
I will stop my drivel.
--Duker |
