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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (30883)	6/8/1999 3:14:00 PM
From: A. Edwards	Read Replies (1) \| Respond to of 70976

Analyst met with AMAT top management last week, here are the comments: Meeting Takeaways: 1. Good order visibility for 6 months. No DRAM order cancellations. 1Q00 not visible yet. 2. Waiting to see the drivers, which will allow the bookings to climb beyond the $1.5 billion plateau. Japan still soft, with Korea and Taiwan being strong. 3. Order activity from communications driven customers is excellent - Texas Instruments. 4. We are in a world of capital spending on a "need to" basis only. Process equipment is up from an estimated 40%-45% of capital spending to 56%-60% of spending as semiconductor companies focus on reusing existing bricks and mortar and focus on generating more from less. This trend hurts the companies, whose products have longer product cycles, but is neutral to AMAT due to its short product life cycle profile. 5. Company believes that its 3.0-3.5 month backlog strategy is a significant competitive weapon. We believe that this could open up additional market share gain opportunities. Longer term though, this increases the quarter-to-quarter fluctuations. 4. Quite amazingly, company expects head-count to be roughly flattish in spite of the huge revenue ramp. Increases revenue per employee to $450-$500k from $300k industry average. 5. No new capacity additions needed in Austin to get to $8 billion revenue run rate. 6. Company feels that Obsidian solves the time to market issue with fixed abrasive technology. Mainly applicable to shallow trench isolation (STI) and copper. Obsidian also opens up IBM as a new customer. 7. Obsidian transaction on the verge of being approved. 8. PDC (Process Diagnostics and Control) booked a record quarter during 2Q99. Company is focused on improving the supply chain and manufacturing model of PDC to improve gross margins (currently below the model). 9. AMAT heavily focused on outsourcing with gas panel outsourcing by year-end and modules, materials and logistics to follow. Company values its mainframe and process chamber core competencies dearly and these areas will not see any outsourcing. 10. Oracle ERP system phase I complete by 4Q99 (estimated costs of close to $100 million cumulatively). The benefit should begin kicking-in in 2000. 11. Company expects to use its $2 billion plus cash balance to strengthen its Scalpel, software and lithography initiatives. 12. AMAT has executed almost perfectly in the current round of 0.25/0.18 micron buys. The next major focus will be - "How do you sell modules and solutions for the 0.13 micron generation". This will also be a big priority at 300 mm. 13. Due to size and critical mass benefits, the company can achieve its 300 mm R&D development within a $175 million - $200 million R&D budget (our forecast for the last two quarters of fiscal 2000). 14. We believe that 300 mm R&D tool development will pick up steam over the course of the next 3-6 months and believe that it could pose a problem for medium and smaller companies in terms of higher R&D expenses than the current expectations. 15. Refurbish business could be $200 million per year within 1 year with PVD providing the main boost.