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

To: FJB who wrote (40976)	12/20/2000 5:47:45 PM
From: Gottfried	Read Replies (4) \| Respond to of 70976

Thanks Robert, all 3 numbers down... Shipments Bookings Book-to-Bill June 2000 2,259.6 2,858.8 1.27 July 2000 2,373.0 2,901.5 1.22 August 2000 2,431.0 2,984.1 1.23 Sept. 2000 (final) 2,475.9 2,887.6 1.17 October 2000 (revised) 2,577.9 2,995.2 1.16 November 2000 (prelim.) 2,443.2 2,741.2 1.12 G.

To: FJB who wrote (40976)	12/21/2000 8:38:08 AM
From: FJB	Read Replies (1) \| Respond to of 70976

Brett Hodess comments on the cycle. ML:November Book to Bill Drops to 1.12 on Weak Orders Reason for Report: Analysis of Monthly Book to Bill Results 21 December 2000 Brett Hodess Samuel Wilson Sameer Desai Investment Highlights: • The preliminary November semiconductor capital equipment book-to-bill for the US equipment companies came out at 1.12, Down from 1.16 in October. The October book-to-bill was revised down from 1.17. • Overall orders decreased -8% month-to-month. Orders increased 61% year over year, a big slowdown from 86% last month. Shipments also declined -5% month-to-month. November is normally a strong seasonal order month with the 10 year average order growth of 5% month-to-month. • Front-end (AMAT, KLAC, LRCX, NVLS …) orders declined for the first time in over a year at -8% month to month. The front-end book-to-bill remained very healthy at 1.24 vs. 1.28 last quarter only because shipment declined –5% as well! The normal trends is for front-end orders to increase 6% in November month-to-month. This ratio bottomed at 0.56 in 1998 and 0.69 in 1996. • Back-end (TER, KLIC…) orders declined -11% sequentially, the fourth month in a row of declines. Thus, the back-end book-to-bill decreased from 0.81 to 0.76. This ratio bottomed at 0.52 in 1998 and 0.62 in 1996. • The negative semiconductor end-market data is causing a rapid reduction in capital spending plans that is already manifesting itself to semiconductor equipment companies. Once the order reductions begin, they have continued for an average of 9 months in previous downturns. Thus, we can expect the book-to-bill indicator to be on the decline for several quarters. Book-to-Bill reflects capital spending reductions cited in last 8 weeks The book-to-bill decline resulting from the order reductions in both the front and back end are not surprising in light of the capital spending reductions that are beginning to be announced across the industry. The ratio for the front-end remains high at 1.24, but should start to drop quickly as semiconductor companies begin to ship more backlog than new orders. November is generally a strong month for orders, with the historical trend up about 5% over the last 10 years. Thus, the reversal of orders to a decline is significant. In the last 3 downturns, orders have been cut rapidly from the peak for on average 8-9 months to the trough. Orders have declined from 45% to 70% peak to trough during these periods. Thus, if this cyclical down turn is near the average of the last 3, we should see an order bottom in the 50% decline range from the October levels in the June through August period in 2001. The stocks historically bottom only a few months before the order bottom as shown in chart 1. Thus, we believe the stocks are between 1 and 2 quarters away from making cyclical bottoms. We note that the early sell off in the group could be a precursor to an early recovery, but believe that this would still wait until the further estimate cuts that are looming are built into the group. Remember that in a declining revenue environment, current valuations may over state trough stock prices. Table 1: Nov. Semi Equip Book-to-Bill ($ millions) Nov-00 Oct-00 % Change % Change ________________________________________________________________________________ Shipments M/M Y/Y Front End $1,844.0 1,939.8 -5% 83% Test/Assembly $ 599.2 638.1 -6% 52% Total 2,443.2 2,577.9 -5% 75% Bookings Front End $2,283.6 2,480.6 -8% 112% Test/Assembly $ 457.6 514.6 -11% 24% Total $2,741.2 2,995.2 -8% 89% Book to Bill Front End 1.24 1.28 Test/Assembly 0.76 0.81 Total 1.12 1.16 ________________________________________________________________________________ Source:SEMI Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department