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

To: Gottfried who wrote (62218)	3/21/2002 10:50:21 AM
From: Mark Duper	Respond to of 70976

Applied Needs to Stand Up Straight and Smile By Tish Williams Senior Writer 03/21/2002 10:42 AM EST URL: thestreet.com Applied Materials (AMAT:Nasdaq - news - commentary) needs to be as perky as a beauty queen's smile. Thursday the chip equipment giant hosts an analyst meeting in Silicon Valley, a little more than a month after it reported first-quarter results. It would be surprising to get new guidance from the company so soon; instead, investors will be monitoring posture and other intangibles. With any luck, Applied will please the market with a bullish outlook on orders and hint at accelerated spending from chip makers. On February 12, Applied predicted that it would have stable-to-slightly improved revenue in the second quarter of 2002 from the first quarter's $1 billion finish. More importantly, the company forecast solid growth in equipment orders, sketching out a 10% to 15% jump in orders to a range of $1.23 billion to $1.28 billion. Current consensus estimates call for $1.03 billion in revenue and 3 cents a share profits, according to Multex.com. Semiconductor fans are eagerly noting any signs of a pickup in the chip business, but have received enough negative data to know that many sectors have hit bottom; immediate recovery is not a foregone conclusion. In recent weeks, they've been excited by the idea that long-stuffed communications channels have cleared, but have also been sobered by the idea that a much-anticipated PC revival won't hit until 2003. Meanwhile, PC companies such as Dell (DELL:Nasdaq - news - commentary) have signaled that steep declines in DRAM prices have subsided, but have not necessarily totally stabilized -- which Micron (MU:NYSE - news - commentary) will also have something to say about when it reports on the second quarter of its fiscal 2002 after the market closes Thursday. Health in the equipment sector would be a sign that chip companies are either aggressively pursuing new technologies or filling up all the manufacturing capacity that went unused in 2001. On Wednesday, the Semiconductor Equipment and Materials International trade organization published improved book-to-bill numbers for the capital equipment industry, showing strong 18% growth from January to February in orders for back-end products, such as test and assembly equipment. Overall, the book-to-bill ratio grew from 0.81 to 0.87, as part of six consecutive months of moving closer to the healthy and elusive 1-to-1 ratio. In a rough day of trading, the news failed to invigorate equipment stocks, as Applied fell 3%, Novellus (NVLS:Nasdaq - news - commentary) dipped 4%, Teradyne (TER:NYSE - news - commentary) lost 2%, Brooks Automation (BRKS:Nasdaq - news - commentary) slid 6% and KLA-Tencor (KLAC:Nasdaq - news - commentary) gave back 3%. Analysts are keenly interested in Applied's business, though many have cooled on the stock since a run on Applied shares has boosted prices by 79% since October 1, and it now trades for nearly 39 times 2003 earnings, as gathered by Thomson Financial/First Call. That valuation factors in a bustling recovery from projected 27 cents a share profits in 2002 to an estimated $1.31 a share earnings in 2003. Applied is expected to benefit in 2002 from its 300mm technology, which big-budgeted Intel (INTC:Nasdaq - news - commentary) said it would rely on to outpace chip competition. Additionally, more advanced copper technology is an area in which Applied Materials can thrive. However, Deutsche Banc Alex. Brown analyst Tim Arcuri argues that Applied has "put a very happy face on the copper situation" and that its equipment could be having difficulties producing promised outputs. For the chip equipment connoisseur, such hot products will be the focus. The mainstream chip investor, however, will gauge Applied's attitude toward its business. Expect them to run with any details that indicate whether the chip upcycle has greater signs of strength than conflicting data has provided so far.