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

To: Dr. Mitchell R. White who wrote (41804)	1/30/2001 11:31:56 PM
From: advocatedevil	Read Replies (1) \| Respond to of 70976

RE: "...they announced locally (but just as publicly) that there will be no contractors left on site by early February; that all senior management and executives will take pay cuts; that there will be 5 shutdown days this quarter (not quite a 10% cut across the board); that there will be more drastic efforts in Q3 if the situation doesn't improve." Mitch, Interesting post. How was the above communicated? (Internal company memo? E-mail? Other?) Is there any way to access and confirm this info other than putting a call in to IR? (Please don't take this the wrong way. I do not suspect your statements to be anything but true, however, I'm certain you'd agree that facts must always be verified.) BTW, I generally agree with you comments that last year's price correction had more to do with overvaluation than anything else. AdvocateDevil

To: Dr. Mitchell R. White who wrote (41804)	1/31/2001 2:11:35 AM
From: FR1	Read Replies (1) \| Respond to of 70976

Dr.M - Good post and it paints a realistic picture. IMHO, There are two things going for us: 1) The FED caused this mess by making money so expenisve that T, WCOM and the other leaders had real trouble getting the kind of financing they needed to continue rolling out their products. A sudden drop in interest rates, hopefully, will clear this problem up. The idea of a bad (negative growth) quarter (this one) and then steady improvement sounds right. 2) If there was no driving force in our society we would go into recession for a very long time. Probably years. However, the internet is arguably the greatest force for change in human history and we are right in the middle of it. We probably won't realize how powerful it is until we look back 50 years from now. So the force (demand) is there to spring back. I bet AG cuts 50 tomorrow. Then Chambers (CSCO) will come out next week telling everyone that things are bad now but he just called all the major vendors and they are talking positive (he kind of already did this).

To: Dr. Mitchell R. White who wrote (41804)	1/31/2001 8:46:45 AM
From: Alastair McIntosh	Respond to of 70976

Dr. White, it would appear that CSFB's outlook is similar to yours: (Sorry, I can't post a URL for the report) Preannounces 1Q(Jan) - Difficulties Just Beginning. 1QFY01 shortfall. AMAT announced revised 1Q guidance to revenue 7-10% below prior guidance of $2.90 to $2.95 billion - implying revenues between $2.60 to $2.74 billion. The company also guided to a book:bill of less than 1.0 to 1 vs prior guidance for approximately $3.0 billion in orders. We had been anticipating revenue of $2.93 billion and had revised down our order estimate to $2.5 to $2.8 billion range earlier in the quarter. Our new revenue and EPS estimates are $2.65 billion, $0.60 - and we believe booking will come in at the low end of the range at $2.5 billion. Street consensus is currently $0.74. The company cited excess inventories in the PC and telecom supply chains and chipmakers pushing out and/or canceling orders as the driver to the shortfall. Outlook Not Too Rosy - Pushouts/Cancellations Accelerating. 1QFY00 shortfall - January falls off the edge. We believe the approximately $300 million revenue miss occurred almost entirely in the month of January. We believe cancellations have accelerated during the first month of 2001 and are likely to continue near term as chipmakers slash budgets. We anticipate a fairly cautious outlook from AMAT on the 1Q conference call on Feb 13th. We believe that the company is implementing cost controls as business deteriorates - selective pay cuts, hiring freezes, and travel restrictions. Correspondingly, we believe that the company should maintain operating margins in the mid-teens at the trough - significantly higher than the 5-7% operating margins seen on a 50% revenue drop in the 1998 downturn. We see little evidence to point to "conventional wisdom's" assertion that the 2HC01 will see a rebound - and anticipate 2001 will likely be sequentially down through October. 300mm appears on-track, but not accelerating as many believe. We believe there are 5-8 pilot facilities coming online in 2001, each representing approximately $400-700 million in spending. Lowering F01 Estimates. New F01 estimates. Given reduced 1Q outlook, we are lowering our 1Q revenue and EPS estimates to $8.61 billion and $1.50 from $9.59 billion and $1.85. Our new numbers anticipate a bottoming in fundamentals early in F02. The valley is clearly getting wider and deeper. Our new model reflects a trough in 4QF01(Oct) on a peak to trough revenue decline of 40% and a peak trough order decline of 50%. We believe the company can maintain operating and net margins of 14% and 11% respectively during the downturn. Duration More Important Than Depth Duration is the key risk. Many have argued that AMAT has never seen more than 3 consecutive quarters of revenue or bookings decline. First, we would point to 1984-85 where the company had sequential decline in 5 out of 6 quarters with the 6th quarter being basically flat; next we would focus on 1996-1997 where, if Korea hadn't accelerated spending in the face of oversupply, AMAT could of experienced 4 or 5 consecutive quarters of declining orders. In fact, given recent levels of inventories throughout the supply chain reported in 4Q(Dec) results, slowing utilization rates at foundries, and our increasing concern on supply dynamics, we believe it is likely that orders do not bottom until late 2001 or early 2002 - well beyond the mid 2001 time-frame that many anticipate. Where do we go from here? After recent run-up, valuation seems rich. Trading at 5.2 times FTM sales, 7.4 times book value and 45X our C01 EPS estimate of $1.15, the stock appears richly valued at current levels - anyway you slice it. We recently took another look at how stocks trough relative to bookings as business turns - the data suggests that stocks trough must closer to fundamentals in the troughs (1-3 months) than in the peaks (5-7 months). Given that we are anticipating a trough in fundamentals sometime in late 2001 or early 2002 - we believe a better buying opportunity will occur in early 2H01.

To: Dr. Mitchell R. White who wrote (41804)	1/31/2001 9:08:21 AM
From: Proud_Infidel	Read Replies (3) \| Respond to of 70976

Mitch, Thank you very much for the update from Ground Zero so to speak. I had heard the same from someone who I believe is in your area via an email, so I think the news must be out for the most part, since I am usually at the end of the information foodchain:-) The jist of my converstaion was that Managers were meeting offsite to rank employees in case of downsizing and temporary workers were already being cut, with more cuts being made as needed if necessary. But I must say that I did not put in the gritty research time you did. You even went out and drank beer for the cause......that is above and beyond the call of duty:-) All the best, Brian Edit: I looked at a 20 year chart of AMAT yesterday, and even though this was the first downturn in quarterly business so to speak, it looks already to be as long as other declines in share price. I am not saying that we will go up anytime soon, only that this appears to be already priced into the stock. And please note I was only eyeballing a chart so I know the imperfection of any projection made, so no flames please(this last line is not directed at you Mitch). Subject 50522