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Technology Stocks : Lam Research (LRCX, NASDAQ): To the Insiders -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (3264)	8/20/1999 9:44:00 PM
From: Jong Hyun Yoo	Read Replies (2) \| Respond to of 5867

So how have you guys been doing so far? I guess everyone is hurting a bit lately with LRCX having a good 20% fallback from 52 week high. Well, although stock price has been declining lately, my optimism has not been. In fact, recent news of order flattening ironically could be a very bullish news. My reasons are as follows: 1) Very cautious stand on the equipment purchase by the chipmakers will ensure that this upturn cycle will last in duration. Indiscriminate spending during last upturn created a huge inventory glut and cause the price to plunge initiating three year downturn. Demand for the chip remains very healthy and growing. Yet the supply curve will be restrained if chipmakers spend less on the expansion. When demand really picks up by this year's end, chipmakers will be forced to add the capacity causing the surge in orders. 2) There is a limitation on how much we can shrink the feature size of the chip. Currently, chipmakers are shrinking down to .18 um to pump out more chips per wafer. When industry was using .5 um for the feature size, there was much room for yielding more chips per wafer by shrinking the feature dimension. Now limited by the Litho bottle neck, there is much less room. In order to increase the production, chipmakers will be forced to purchase more machines. 3) So far all the recovery in the chip equipment business came from chipmakers upgrading their lines to current technology. With exception of Taiwanese foundaries, capacity buys have not begun yet. Chipmakers want to make sure the demand is there before they aggressively ramp up the production. I am betting that demand will be robust late this year and early next year when many people purchase computers for Christmas gifts and Y2K issues will be settled and many business start investing again in improving its infastructure. PC selling during Christmas has been traditionally strong but I am thinking this year will standout the most now that PC price has really come under $500, the price that people can afford. In addition demand for chips in the area of networking and communication has been strong and will like to remain so in the near future. 4) Further spread of PC will accelerate internet growth. This means greater demand for chips in the networking area and consumer internet appliances such as MP3 players and flash memory that will be used for MP3 players. This will further tighten the supply curve early next year and force chipmakers to invest more. 5) I am especially optimistic for LAM. This is because even during this period of "digestion" of new equipments by the chipmakers, LAM can grow its earning by operational leverage and market share gain. Companies like AMAT and NVLS already achieved the revenue level near the all time high. LRCX's record Q revenue is 370 million. Right now next Q guidance sits at $240 million. Why the lag? some lost from exiting cvd and flat panel business. But majority stems from the market share loss to AMAT and TEL. LRCX supposedly regain the lost market share in Metal and Poly etch nicely. But much room can be there for the oxide etch market share gain. Also CMP and cleaning business can add additional revenue. I have a very good reason to believe that LAM's effort to gain market share in oxide etch arena will be very successful. I am already hearing very good feedback on EXELAN in the Korea and Taiwan where the order trend is the strongest currently. LAM is already generating higher EPS with lower revenue than when its revenue was above $300 million per Q. We have a tremendous earning potential even if LRCX merely gains back the oxide market share. So for this reason, LRCX can still have a nice earning growth during this order plateau period. So guys hang in there. We had good days and bad days... But we have not had the greatest day yet. But it certainly feels like we are heading for that direction.