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

To: Kirk © who wrote (3443)	10/19/1999 1:06:00 PM
From: Jong Hyun Yoo	Read Replies (4) \| Respond to of 5867

Kirk, Here is SimthBarney take on CMP win at TSMC. I believe LRCX is still undervalued at even at this level. Looking for $120-130 by sometime next year. You can take some profit to ease your mind. But I think you should stick with most of your holding till at least early part of the next year. I know it has been an incredible runup but you have not seen the real run yet. The 4th inning has just begun...Good luck.. 10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) Milind B --SUMMARY:--Lam Research Corporation--Semiconductor Equipment Lam Research announced that the Teres CMP polisher has been chosen as the Tool of Record for copper at TSMC. The TSMC account penetration and the strong position in copper polishing increases our visibility on the product turnaround and offsets any potential declines due to the "cleaner" revenue stream. Lam is well positioned to outperform its peer group. We will have a more detailed update after the company's conference call on Thursday, Oct. 21st. 10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) Milind B --EARNINGS PER SHARE-------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 06/99 EPS $(0.70)A $(0.64)A $(0.38)A $0.28A $(1.42)A Previous 06/00 EPS $0.50E $0.62E $0.77E $0.85E $2.75E Current 06/00 EPS $0.50E $0.62E $0.77E $0.85E $2.75E Previous 06/01 EPS $N/A $N/A $N/A $N/A $3.05E Current 06/01 EPS $N/A $N/A $N/A $N/A $3.05E Previous 06/02 EPS $N/A $N/A $N/A $N/A $N/A Current 06/02 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: 10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) Milind B --FUNDAMENTALS-------------------------------------------------------------- Current Rank........:2H Prior:No Change Price (10/18/99)....:$70.62 P/E Ratio 06/00.....:25.7x Target Price..:$75.00 Prior:No Change P/E Ratio 06/01.....:23.2x Proj.5yr EPS Grth...:12.0% Return on Eqty 99...:N/A% Book Value/Shr(99)..:12.89 LT Debt-to-Capital(a)40.1% Dividend............:$N/A Revenue (00)........:N/Amil Yield...............:N/A% Shares Outstanding..:38.4mil Convertible.........:Yes Mkt. Capitalization.:2711.8mil Hedge Clause(s).....: Comments............:(a) Data as of the most recently reported quarter. Comments............: 10/19/99 Lam Research Corporation (LRCX $70.62,2-H,Tgt $75.00) --OPINION:------------------------------------------------------------------ The TSMC Penetration Opens Up A Sizable Market Opportunity For Lam Research... We estimate that the total worldwide market for CMP will be $900 million in 1999, a growth of 50% over 1998's market size of $600-$625 million. We believe that the CMP market should grow 10%-20% faster than the mainstream equipment market for at least the next 3-5 years. In the current world of subtractive aluminum processing, CMP is mainly used for 1) tungsten polishing, 2) oxide polishing, 3) polysilicon polishing and 4) emerging applications such as STI (shallow trench isolation). In the upcoming world of damascene processing, CMP will be mainly used for 1) copper polishing, 2) tungsten polishing, and 3) other smaller applications. We believe that copper CMP is the biggest challenge facing the industry currently due to various problems; 1) copper is typically very soft, while the underlying barrier is extremely hard (and needs to be polished also), 2) copper presents dishing and corrosion problems. Thus the copper CMP winner stands to capture a significant proportion of the value in the world of damascene processing. We believe that Lam Research and Applied Materials are poised to dominate the market; Lam due to its "revolutionary" linear polishing technology, and Applied due to its significant installed base, and its module based solutions approach. We believe that the increasing push on the part of semiconductor companies to aggressively dual source also creates a solid market opportunity as Lam is the only credible, well capitalized CMP competitor. We will have a more detailed update after Lam's conference call on Thursday, but in summary, we believe that the company's copper CMP products are out of the starting blocks in a terrific shape, and while the market shares 2-3 years down the road are still to be decided, we believe that the company stands to gain at least a 30% market share. ...And Removes Our Concern About The Slowdown In Cleaner Revenue Growth. The strong start to the copper polisher also removes our concern regarding the decline of the cleaner revenue stream. We estimate that Lam Research currently derives $80-$100 million from the sales of its post-CMP cleaners. With Applied Materials moving to the Mirra-Mesa in-house cleaner, there were concerns on the rate of growth of the post-CMP cleaner revenue stream. However, every polisher will probably sell for 2.5 times the post-CMP cleaner, and we believe that it should be relatively easy for the company to offset the potential decline of the post-CMP cleaner with the Teres. The Company Has Made Good Progress In New Etch Product Launches. Recognizing the pricing pressures inherent in the etch market, the company has moved to rapidly launch the Exelan, which offers both an increased process capability and a better margin performance. In addition, we believe that the company has made headway in regaining some of the lost market share with Tokyo Electron and Applied Materials. Thus the company is demonstrating a solid competitive posture in its core etch markets. Lam Still Trades At A Discount To Its Peer Group And This Discount Can Easily Narrow. While large/mid cap equipment companies such as Applied Materials, KLA-Tencor and Novellus Systems are trading at 4.0-5.5 times next calendar year's sales, Lam Research is currently trading at 2.7 times calendar 2000 sales for two main reasons, 1) the company until recently was a turnaround, and 2) difficult competitive scenario in etch and CMP. Concern #1 has been put to rest with the tremendous operational turnaround by the Bagley group, and we believe that over the course of the next 6-9 months, the product/market share concerns will ease, thus allowing a multiple expansion. In conclusion, we believe that Lam Research is set to embark on the second stage of its turnaround, driven by the new products in CMP and etch. We will have a more detailed update after the company's 1Q00 earnings conference call on Thursday, October 21st.