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

To: Ed Beers who wrote (3638)	11/16/1999 6:24:00 AM
From: Duker	Read Replies (1) \| Respond to of 5867

Ed et JHY, That's the rub, isn't it? How much are you willing to pay for $5.00 in 'peak' earnings? Once the cycle is underway (and it clearly is for the larger companies in the front-end), you really begin to start 'playing stockmarket.' Given the unpredictability of the SemiCap cycle, I would argue that a 5% cap rate (20x's EPS) would be pretty generous. That does not mean that The Market would not/has not assign(ed) higher multiples; it just means that you start to play 'Cyclical Chicken' with the rest of the participants. The temptation to do this is really quite strong, but it is a very difficult game and the odds are with the house as they are with most games of chance. Perhaps we are not there yet. It could be that the game of Cyclical Chicken will not commence for another year or two -- no one knows how long and how strong the cycle is until it is over. I feel much more comfortable buying companies at ridiculously low valuations than holding them hoping for someone to do the same on the other end of the spectrum. As we enter this more mature phase of the recovery for the bigger front-end players, I have done very well and hold a much more modest position than I did a year ago. That said, LRCX is still a very big position by all metrics (still two digits to the left of the decimal). --Duker

To: Ed Beers who wrote (3638)	11/17/1999 7:52:00 PM
From: Jong Hyun Yoo	Read Replies (1) \| Respond to of 5867

Ed, you might be right that we could see a plateau period in which order number could level off. And you are right that we could see a little sell-off or profit-taking. My opinion is that one should use this sell-off as an opportunity to add more to one's position. I believe that we are now at the early phase of mild upturn, which will be followed by more robust spending towards late 2000. This year, I believe is analogous to 1994 where we started a mild upturn followed by very robust revenue growth in the year 1995 and 1996 by all equipment makers. All equipment manufacturers stock price went up siginificantly in 1994 and many people took profit, only to see their stock double a year and a half later. At this point, equipment stocks are not cheap. As a result, it becomes very important to stick with those companies with best ability to grow EPS. If I had to choose four companies, they would be KLAC, AMAT, NVLS, and LRCX. Out of those four, you can guess that LRCX is my favorite even though I do own AMAT and NVLS as well. Remember that Jim Morgan of AMAT told us that his company can achieve the revenue of 10 - 12 billion in 2003 from current 4 billion. You can see that we are just starting boom period in this sector. I also believe that LRCX can achieve a revenue figure close to 2 billion at the peak of this cycle. Remember in 1996, LRCX was 1.2 billion company with head count close to 6000. At that time, LRCX had EPS of roughly $4.00.. This was with a terrible operational inefficiency, low gross margin, product transition issues to alliance platform, and falling etch market share. Since then, the situation drastically has changed. The transition to alliance platform is complete with much of the mechanical reliability issues resolved. We have new products in the pipeline to further grow the revenue number (TERES, EXELAN, and maybe new 9100 oxide etch in early next year). Gross margin and operational efficiency has been improving. And finally head count has been reduced to 2800.. All these translate into tremendous earning leverage. If LAM gets back to the record revenue number of 1.2 billion, I believe that LAM can do somewhere close to $5 a share. If LAM does 2 billion in revenue number, EPS exceeding $8 is not unreasonable. you can give any PE ratio you want 20 ($160), 25($200), 30($240)... But you can see that all these numbers are significantly higher than the current stock price.