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

To: Gottfried who wrote (35771)	7/15/2000 1:25:54 PM
From: Jeffrey D	Respond to of 70976

I don't recall seeing this article from Motley Fool posted here. Jeff << fool.com Cycling Through the News at Applied Materials Applied Materials starts off its trade show week by formally introducing its new line of 300 mm wafer processing equipment. However, investors are still jittery about the chip business after bearish analyst comments last week about the industry's notorious cyclicality. But for Applied Materials, competitive advantages have mattered more in the past than the ups and downs of the cycle. By Brian Graney (TMF Panic) July 10, 2000 Semiconductor capital equipment lead steer Applied Materials (Nasdaq: AMAT) was in the news today as the company formally unveiled its new line of 300 mm wafer processing equipment. Timed nicely with the start of this week's SEMICON West 2000 trade show for chip equipment (no, that wasn't an innocent coincidence), the announcement should add to the momentum of a much-anticipated industrywide transition from chip production processes based on 200 mm (roughly 8 inches) wafers to one based on 300 mm (about 12 inches). Where to from here? Applied Materials in particular has a lot at stake in seeing this transition move along smoothly over the next few years. The company's 21 new systems will cover 80 different processes, or about 75% of the entire wafer production process. The company has stated that 300 mm equipment could make up about 30% of its total business by 2002, barring a general downturn by the chip market. That downturn caveat is the real kicker, though, as there have been rumblings lately that the high-flying chip industry is on the verge of gunning the RPM gauge a bit too far and overheating. The sector is still reeling from a report last week from Salomon Smith Barney analyst Jonathan Joseph, who predicted capital spending by chip firms will top out this year as semiconductor unit growth hits its peak. Such an occurrence would intuitively take a bite out of the growth rates of both the chip makers themselves and the capital equipment providers such as Applied Materials. Breaking the cycle But in the case of Applied Materials, the company has competitive advantages through its scale and execution ability that have allowed it to build value year after year regardless of the ups and downs of the chip cycle. For instance, longtime followers will recall how well the firm performed after the last cycle peak in 1996. Revenues and operating income understandably took a hit during fiscal 1997 and 1998, but the firm was still able to increase its book value per share by 22% in 1997 and another 6% in 1998. Predicting cycles in the chip market can be a fun intellectual exercise, but it's not really businesslike investing. For investors looking at a top dog like Applied Materials, taking the proper timeframe is important. With a tremendous time commitment, a cycle-attentive speculator may be able to build up the experience and familiarity needed to be able to screen through the rampant, everyday chip-related noise and correctly predict the short-term valleys and peaks. But for a longer-term investor, paying closer attention to the competitive advantages of the businesses involved is the better and more profitable strategy. >>