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

To: William Griffin who wrote (36752)	8/14/2000 3:34:21 PM
From: Jeffrey D	Respond to of 70976

AMAT, per CS First Boston on 08/10/2000. This is of particular interest: "In addition, AMAT is not recognizing 300 mm shipments until final "buy-off" by customers, which we expect to begin to occur in early C01. To date, we believe that AMAT has shipped over 30 tools and we anticipate AMAT will ship over 100 tools by calendar year-end. This would imply nearly $200 mm in 300 mm revenue waiting to be recognized in 1HFY01." Jeff << Investment Summary AMAT is a buy rated stock. The key issue impacting the stock is fears that the current cycle is beginning to show signs of weakness. Recent sentiment reflects a growing concern by the investment community that end market demand drivers (especially cell phones) have waned in recent months. We believe that end market demand trends are seasonal and that the current supply environment is healthy and supports incremental growth in capital expenditures by the semiconductor industry. At current valuations, we would be buyers of AMAT in anticipation of a pick-up in end market demand as we move into the seasonally strong 3Q and 4Q, which should provide the basis for multiple expansion. Germane to AMAT, the Company has brought to market a robust product portfolio that is yielding material share gains in deposition and polishing, with copper and 300 mm products a potential downstream kicker. In addition the Company is experiencing a strong balance among its demand drivers: (1) Taiwan re-acceleration (2) Japan expansion (3) DRAM investment (4) copper and (5) initial investments in 300 mm pilot facilities. Our price target is $112 or 28 times our calendar 01 estimate $3.90. 3QFY00 "as-advertised." AMAT reported 3QFY00 revenue and EPS of $2.73 billion and $0.70, versus our estimates of $2.77 billion and $0.70. Street consensus was $0.68. Reported 3Q results were ahead of official company guidance of $2.6 -2.7 and $0.64 - $0.68. 3Q Margin story solid. Gross margins in 3Q were 50.9% - 10 basis points above our estimates and driven by increased factory utilization. SG&A as a percent of sales was 9.6%, 50 basis points better than our estimates driven by leverage in the infrastructure. R&D spending was 11.1% of sales - 90 basis points higher than our estimates due to increased development costs related to the launch of the company's new ion implant, metrology, etch, and CVD tools. Resulting operating margins of 30.2% were slightly below our 30.6% estimate. Revenue ramp damped by several factors. Upside to revenue continues to be capped by tight supply chain issues - exacerbated by the dramatic ramp in shipments over the last several quarters. In addition, AMAT is not recognizing 300 mm shipments until final "buy-off" by customers, which we expect to begin to occur in early C01. To date, we believe that AMAT has shipped over 30 tools and we anticipate AMAT will ship over 100 tools by calendar year-end. This would imply nearly $200 mm in 300 mm revenue waiting to be recognized in 1HFY01. 3Q bookings in-line, 4Q guidance slightly better than expected. Bookings for 3Q were $3.28 billion versus our estimate of $3.26 billion and the whisper range of $3.2-3.3 billion. Sequential bookings growth was 12%, yielding a book to bill of 1.20 and a quarter ending backlog of $3.7 billion or 4 months - above the Company's goal of 3-3.5 months and providing the basis for revenue acceleration in future quarters. Importantly, 4Q bookings guidance was slightly better than expected; greater than $3.5 billion implying high single digit sequential growth versus our estimate of mid single digit growth. A closer look at bookings - Business is balanced and wrought with upside potential. Orders for 0.18 micron and below represented 71% of 3Q orders versus 62% in 2Q and 61% in 1Q. Commodity memory was 15% of orders versus 17% in 2Q and 24% in 1Q. MPU devices were 60% of bookings, and foundry represented 25% of bookings. 300 mm and copper are still negligible to the order book. Orders by geography are shown in table 3. The key "take-away" from 3Q was the tremendous balance in business at AMAT. A pause in spending by Taiwan was readily compensated for by Japan. (A quick aside, expect Taiwan spending to rebound in current quarter.) In addition, DRAM is still spending well below trend-line at 15% of 3Q orders. We would expect an uptick in DRAM to a more normal 20-25% run-rate in late 2H00 early 1H01. This would provide upside to the current base of business. Finally and perhaps most importantly, we expect nearly $8 billion in WFE spending from 300 mm pilot facilities over the next 12-18 months. 300 mm pilot facilities should provide bookings and revenue upside potential in 2001 without productivity capacity until 2002 or perhaps even 2003. We believe that supply dynamics are still favorable to support a lengthened cycle. Visibility and Strength of the Cycle are Improving Outlook is continuing to improve. Business trends and customer forecasts continue to improve. We believe that there are 29 fab opportunities in 2000 - 13 new green field and 16 expansions, and 31 fab opportunities in 2001 - 16 green field ( 7 300mm) and 15 expansions. We expect 2H00 and 2001 will see continued strong investment 0.18 micron and below aluminum processing tools, technology investment in copper, low-k and 300mm, a resurgence in DRAM spending, and increasing investment out of Japan. We believe that Applied Materials is well positioned to capitalize on these trends. Additionally, we believe that Applied has taken an early and significant market share lead on 300 mm of greater than 65% versus 50-55% at 200 mm. Laying the foundation for a $20 billion Company Expanding capacity to meet demand. AMAT has expanded capacity and now has the infrastructure in place for $14B in annual revenues going forward and is currently putting together plans to increase capacity to be able to support a $20 billion company in the next couple of years. This will be necessary, as our $14.3B revenue forecast for F01 (up 47% above this year's estimated $9.6B) includes $12B of systems deliveries, pushing the company's capacity utilization rate (net of ETEC and Applied Komatsu, AKT) to over 85%. Even that figure could prove to be low if AMAT is successful in several large bake- offs for copper and 300mm. CREDIT SUISSE FIRST BOSTON CORPORATION Equity Research Americas BUY LARGE CAP Applied Materials (AMAT) In-line Q3 - Cycle Fundamentals Intact. DRAM and 300mm Still Ahead. FY00 and FY01 Estimates Strong revenue stream materializing. Visibility into 1HFY00 is improving for Applied Materials. We believe that AMAT will continue to post sequential gains in revenue, bookings and EPS throughout calendar year 2000 and into 2001. AMAT has shipped over 30 300mm tools and expects to ship over 100 by calendar year end, but won't recognize revenue until the initial tools complete customer buyoff - expected in early CY01. We have adjusted our FY00 estimate to reflect 300mm revenue recognition. Our new estimates for FY00 and FY01 are $9.6 billion and $2.40 and $14.3 billion and $3.75 vs. our prior estimates of $9.7 billion and $2.43 and $14.3 billion and $3.65. Upside from margins still in the cards. Despite lingering supply chain issues that continue to put a cap on meaningful revenue upside, gross margins topped 50% again, while operating margins expanded by 150 basis points sequentially, to 30.2%. AMAT will be pressed to match spending growth with that of revenues in Q4. The bottom line is that upside to our operating margins are quite achievable, especially in F01, if orders hold up as we suspect. A point of reference: in F01, a point of margin may be worth approximately $0. 15 per share, while each $100MM in incremental revenues may yield $0.05 per share. Valuation and Conclusion Thesis intact, valuation attractive. We hold to our thesis that the supply dynamics are healthy and capacity constraints and technology transitions should continue to drive incremental demand for equipment. Trading at 18x our calendar 01 estimate of $3.90, valuation for AMAT is attractive. We would be buyers of the stock in anticipation of the key 2H catalyst: a re-acceleration of end market demand for devices as we enter the seasonally strong demand period. The latter should provide the basis for multiple contraction. We maintain our $112 price target, which is 28 times our CY01 estimate.

To: William Griffin who wrote (36752)	8/14/2000 3:41:30 PM
From: Alan Gallaspy	Respond to of 70976

OT: Legal drug policy People can't afford to buy them I have long held that the only real solution to drug use is to tax the snot out of a legal product, such that everyone that uses addicting drugs knows up front that it will be expensive as hell, yet not have to suffer things like felony drug convictions and the stigma of being a criminal because of an addiction. Presumibly the tax money could be used in real anti drug education programs (not fried egg scare tactics), addiction research, recovery/treatment centers and the like. The DEA would be reassigned to tax collection/enforencemet and the drug czar would be the Anti-Black market czar.