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

To: Cary Salsberg who wrote (10267)	3/6/2002 8:45:39 AM
From: Rock	Respond to of 10921

Cary and Zev, I guess I tend to believe that Cary's scenario is correct on the 2-5yr scale, which makes it an excellent basis for investment. However, Zev's comments on CURRENT valuation are equally compelling. My fear is not that the long term story will be affected greatly, but the likelihood of a mild recovery seems high. The inventories from 2000-2001 are being worked off by AMAT's customers' customers and orders will have to flow as that occurs. However, the orders will only go to equilibrium with current demand, which is probably only a fraction of previous demand due to general over capacity in critical industries (esp. telecom). Trouble is, the upward ramp from the LOW order levels of the inventory correction to the level of low (?) current demand seems easy to confuse with a ramp to previous demand highs (Zev's point, I think). Since so much of the cycle mentality of semi-equip investing is focused on demand turning up, few investors (read: speculators) are going to wait to see just how strong such a ramp will be. That doesn't mean that a recovery in semi-equip shares isn't warranted or that the long term ramp isn't somewhat guaranteed (obsolescence and general chip volume grown are powerful), but it may well mean that the semi-equip shares will get (have gotten) ahead of themselves in 2002. Of course, I'm not quantifying any of this but am interested in how it could be quantified b/c I believe semi-equips have the some of the best business potential in the technology universe. Also, as a matter of disclosure, note that I work in the telecom-equip business and, therefore, may well be more pessimistic about the recovery than I should be.

To: Cary Salsberg who wrote (10267)	3/6/2002 2:05:42 PM
From: Jacob Snyder	Read Replies (3) \| Respond to of 10921

re: I see a very slow recovery and an unusually long up cycle. Predicting a smoothing out of the cyclicality of this industry, has always proven to be wishful thinking. You could be right, but the entire history of this industry, is against you. Over the years, I can't remember how many different rationalizations I've heard, to (quite convincingly) predict that the next cycle will be long and smooth and gradual and not so volatile. And it's usually the upcycles, not the downcycles, which are predicted to be longer-than-ever-before. Logically, the odds of a stretched-out upcycle are the same as the odds of a stretched-out downcycle, yet I rarely hear that prediction. Except at bottoms. Believing in a long downcycle (bookings in the 500-700M range until 2003) is a realization we are reluctantly brought to, after exhausting all other ideas, and only when the evidence is overwhelming. Believing in a stretched-out upcycle is an idea we eagerly seek to justify. In order for me to believe in that possibility, there would have to be some basic changes in the structure of the industry. I'd have to see: 1. The time from committing to building a fab, to peak production of that fab, would have to decrease significantly. I don't see any evidence this is happening. 2. Or, the ability of semi execs to accurately forecast demand for their products, 1-2 years out, would have to improve significantly. Again, I see zero evidence this is happening, either.

To: Cary Salsberg who wrote (10267)	3/6/2002 6:15:42 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 10921

I have two major "fundamental" reasons that lead me to believe the current expansion will not get us above the 2000 cycle peak (and maybe for clarity, I should say that a cycle peak in this "space" is when shipment of equipment peaks, traditionally, that kind of a peak coincide relatively well with stock price peaks as well). My first reason is really a belief no facts, just an observation of the economy and conclusions that might or might not be right). I believe that the recent economic situation has not been a recession, I have stated that belief for quite some time. After 9/11, I thought for a very short time I would be proven wrong, and a normal recession would be precipitated, but it turns out that 9/11 managed to get us a single quarter with negative growth in GDP, the fourth quarter was already positive, and all indications are that the current quarter is also going to be positive. My "model", assumed a profit recession (first dip) due to inventory correction and excess capacity, followed later (maybe a year later) by a real consumer led recession. if that model is correct, then we still have the second leg to drop, and before the chip people can rev up to an 85% plus capacity utilization, another contraction could ensue. If that is the case, only little capacity expansion will be sought, enough maybe to get us for six to twelve months to shipment levels of up to $1.5 B month (nice double from the current rate, but far from the peak shipments we were accustomed in early to mid 2000). That is the second assumption that form the basis for my tenet that the current cycle will be a far cry from the 2000 cycle peak. Mind you, as far as stock prices are concerned, the April to August 2000 highs, where real "mania highs", thus my surprise that the semi equip sector is already pretty close to the 50% plus level of those "mania highs', with no real short term prospects (18 months?) that their sales and profit levels will come close to the first three quarters of 2000. Zeev