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To: Philip W. Dunton, Jr who wrote (3191)	12/14/2000 10:21:47 AM
From: Philip W. Dunton, Jr	Read Replies (1) \| Respond to of 3661

Now It's the Semiconductor Equipment Stocks' Turn to Fall By Caroline Humer Senior Writer 12/13/00 7:57 PM ET First it was waning demand for personal computers. Then it was the semiconductors that power the PCs falling from favor. Now it's the equipment used to build those chips. Wall Street has come down hard on semiconductor equipment makers this week, with companies like Novellus (NVLS:Nasdaq - news), Lam Research (LRCX:Nasdaq - news) and Applied Materials (AMAT:Nasdaq - news) seeing their ratings slashed. Prudential Securities, Merrill Lynch, Salomon Smith Barney and Thomas Weisel Partners all have weighed in on the sector, on the negative side. The stocks, after having enjoyed a bit of a run-up in recent days, headed lower. The potential for problems in the semiconductor sector has been evident for a while, with big-name computer makers like Dell (DELL:Nasdaq - news) having warned about slowing demand earlier this fall. Then, a few weeks ago, Gateway chimed in with a similar warning. All this brought out the chipmakers with their own warnings. And of course that means chip companies like Intel (INTC:Nasdaq - news) won't be putting as much toward capital spending as had been anticipated. So equipment makers won't need to produce as much gear. Weisel Partners, for instance, had expected spending on chip equipment to increase 20% in 2001 from 2000. On Tuesday it lowered its expectations and now figures spending will remain unchanged. Eric Ross, an analyst at Weisel, believes this scenario is likely, especially if the prices for DRAM, or dynamic random access memory, hold steady or continue to fall. There already are some signs of changes in spending. Intel said Wednesday that it now plans to put its Leixlip, Ireland, plant into production in the second half of 2002, not the first half of 2001, as was planned. Ross doesn't expect much more in the way of spending by the large Taiwanese companies that also make chips for the U.S., including Taiwan Semiconductor (TSM:NYSE ADR - news) and United Microelectronics (UMC:NYSE ADR - news). These companies, which account for about 25% of all new capacity, say spending will be flat. Weisel lowered Applied Materials, Lam Research and Novellus to market perform from buy. It also pushed Teradyne (TER:NYSE - news), which makes semiconductor testing equipment, to a buy from a strong buy. (Weisel hasn't done any underwriting for any of the companies mentioned.) Wall Street doesn't agree on how much spending will taper off. Merrill, for instance, lowered its growth forecast for next year to 6% from 12%, while Prudential shifted to a decline, a 7% decrease instead of an expected 12% increase. But the analysts do agree that these semiconductor equipment stocks are headed lower. Both Merrill and Salomon, for instance, say that the downturn in 2001 means these companies are about to experience a downturn similar to 1998. Solly's Glen Yeung, for instance, points to a "likely" capital spending freeze at Intel during the first six months of 2001 as an indication that what's ahead is a "meaningful fundamental deterioration" for the equipment group.