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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (8886)	10/22/2000 9:52:39 AM
From: orkrious	Read Replies (1) \| Respond to of 10921

Ian and Zeev, thank you for such a stimulating discussion. It was a pleasure to read. Now, if I only knew what to do...buy...or sell? <VBG> Jay

To: Ian@SI who wrote (8886)	10/22/2000 11:54:47 AM
From: Zeev Hed	Respond to of 10921

Ian, I am not saying that INTC is "deliberately" issuing false statements. I am saying that it is in INTC's power to handle such trivial problems. They have before and they could if they needed to, my point is that maybe they do not need to. I do not know where the assumption that BTB of 1.00 to 1.1 being unhealthy is coming from. MU has increased its bit shipments last year by 70% over the prior year without much increase in "base capacity", it was all done by improving process and feature reduction. If the CHIP sector is growing YOY at less than 15%, the chip equipment business does not grow much at all YOY. The decline in the last cycle of chip shipments was in the 5% to 10% YOY, but many of the equipment companies had YOY declines in the 30% (and since they did not cut on fixed costs fast enough, they had many sequential losing quarters.) I think that the equipment sector may be driven by two independent factors, the growth (or lack thereof) of the chip business, and technological migrations. Because (so far) the semi business is cyclical (namely the YOY growth rate is cyclical), the equipment business is even more cyclical. If you take an average growth rate of 15% (which is close to 4 times the average GDP growth rate), the total cap ex should not grow at a rate faster than that. Because of long lead times and technological changes we get growth rates in cap ex that amplify the chip shipment rate. When we get to extremes, like recently, when shipments reached $3 B monthly (or $36 B annually for the equip and about $55 to %60 for total cap ex, since equip is only about 60% or so of total cap ex), with then annual shipments of chip at the $220 B to $250 B annually, we set ourselves up for either no additional growth, or actual declines of shipments. At the current rate of Cap-ex (let say $60 B annually), the chip business should be shipping at $300 B annually, that may not happen for a year or two. Thus, IMHO, the cycle top has been set. Mind you, that assumes cap ex at 20% of chip shipments, which even for the semi, is too high, the industry does not generate enough cash flow to finance this (except very few giants like INTC with gross margins in the 60%, AMD with half these margins will find it difficult to finance 20% of sales rates of cap ex). Zeev irrevolute.iuma.com