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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (1010)	8/21/2001 12:22:48 AM
From: Return to Sender	Respond to of 95761

Rescue Us, Microsoft! Lisa DiCarlo, Forbes.com, 08.20.01, 6:00 PM ET forbes.com NEW YORK - It's ironic the PC industry, which for years has quietly seethed about Microsoft's business practices, is now its biggest cheerleader, hanging any hopes of a recovery on the release of Microsoft's upcoming Windows XP operating system. Since the federal government isn't likely to force a delay of XP's delivery, the $64,000 question is how fast and to what extent Microsoft's (nasdaq: MSFT - news - people) operating system (OS) will drive computer sales. Early indications are that it will be several quarters before growth is restored. During an earnings conference call last week, Dell Computer (nasdaq: DELL - news - people) Chief Executive Michael Dell said he doesn't see any catalyst for growth until spring 2002. That led his company to forecast sales flat to down 5% in its fourth fiscal quarter, which is dire news considering Dell is the only major PC company experiencing unit shipment growth today. Echoing Dell's outlook, Hewlett-Packard (nyse: HWP - news - people) last week described the demand for back-to-school consumer products as "subdued," and CEO Carly Fiorina said the company doesn't see any signs of improvement until early 2002. The PC industry has been in the dumps for several quarters partly because of the downturn in information technology and consumer spending, but also because there's no good reason to buy a new computer. If people, especially home users, are spending money on personal computing, it's on things like broadband access--not a bigger hard drive. "Windows XP does represent a quantum leap for home buyers, and that's where [PC makers] are hoping to get their juice," says Roger Kay, analyst at International Data Corp., Framingham, Mass. "But XP doesn't represent any stimulus for corporate buyers." Original equipment manufacturer sales--or sales through PC makers who bundle its OS on computers--represented about 31% of Microsoft's sales for its last fiscal year. IDC, says Kay, had forecast 8% sequential growth in PC shipments for the third quarter. But the market research firm is considering revising that forecast downward due to lack of growth drivers. Microsoft and its partners will bombard potential buyers with ads and other marketing propaganda to convince them they need XP. The company and PC makers, peripheral and component companies will spend about a half a billion dollars promoting Windows XP PCs. Whether customers buy into it depends on who they are. Small businesses and home users are more likely candidates for XP; but, again, broadband communications is more desirable than integrated Internet services. PCs have always been a tough business because they long ago became commodity items indistinguishable from one vendor to the next. Consider that eight years ago there were no fewer than 30 American PC makers and the top dog owned just about 10% of the market. Consolidation happened, companies went out of business and, today, five companies account for 60% of the PC market. Large companies are typically very slow to adopt new technologies, and Windows XP will be no different. PC makers won't get any help from Microsoft in the way of minimum system requirements for running Windows XP. The requirements won't give users satisfactory performance when running most applications, and they certainly won't compel anyone to buy a new PC. Microsoft is recommending a 300-megahertz processor, 128 megabytes of memory and a 3-gigabyte hard drive. To say there's a lot riding on the success of Windows XP is a gross understatement. Not only do the PC makers badly need it, but so do the companies who make the semiconductors, hard drives, graphics cards, software and peripherals. They're putting all their eggs in this rickety basket, but what choice do they have? The last PC boom came with the release of Windows 98, which happened to be the OS on the shelf at the time when everyone was buying PCs to get online. "XP is the only stimulus outside of normal seasonable demand that anyone can look to for a growth pop," says Kay. "There is so much riding on this that I don't think it can meet expectations."

To: Donald Wennerstrom who wrote (1010)	8/21/2001 12:24:27 AM
From: The Ox	Read Replies (1) \| Respond to of 95761

During Sept/Oct 98, the previous cycle bottom, people were also discussing how the lack of demand, combined with overcapacity, would stretch on for years. We are reading and hearing the same comments at this stage of the current cycle and the numbers look remarkably similar. Bookings were off 73% in Sept 98 compared to Sept97 (down to 481 from 1773) whereas last month's numbers were off 75%. Back then we were told that the PC upgrade cycle was over and that there would be limited demand for semis in the future until a new "killer app" came along. I can't tell you how many times I've heard this or read this comment lately, especially as it relates to DRAM pricing. Is it possible to calculate the % drop in RAM pricing during the 98 lows and compare them to today's prices? Tomorrow's statistics should be very interesting and will help us determine if we are viewing strong similarities between these two cycle lows. Falling on a FED meeting day, too. Should be a lot of fun to watch the markets the next couple of days.

To: Donald Wennerstrom who wrote (1010)	8/21/2001 5:34:57 PM
From: Return to Sender	Read Replies (1) \| Respond to of 95761

3:32PM SEMI Preview : CSFB previews the July semiconductor equipment book-to-bill; firm expecting a BTB of 0.63-0.68 vs 0.54 in June... increase likely to be a function of shipment decline continuing to outpace bookings decline... calls the report a lagging indicator, and would argue that data are analytically insignificant. 2:50PM Sector Watch: Semiconductor : -- Technical -- Index tests the bottom of its recent three day trading range (552.41) and attempts to bounce (Semiconductor HOLDRS (SMH) broke a similar level). Needs to work back through 558/559 or it will remain poised for a breakout. Next supports of interest come into play at 541 followed by 537 with the July low at 530. stockcharts.com[m,a]daclyymy[pc13!d20,2!i!a1875][vc60][iLc20!La12,26,9!Lw25!Lk14!Lf!Ld20!Lg!Lp14,3,3] I believe we could see a test of the July low of 530 on the SOX tomorrow morning followed by a rally in the semiconductors that will lead the NASDAQ back higher. I can't wait to see the number of oversold semiconductors on my screen tonight. How close to my previous high of 99 out of 201 might it be? I bought JBL at 22.30 today Don. I hope that a rally for the SOX is about to begin as early as tomorrow. RtS