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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (1588)	7/17/2002 7:35:06 PM
From: Proud_Infidel	Respond to of 25522

Utter nonsense. Extrapolating out years into the future is an extremely difficult task, much moreso at bottoms or tops. Well, guess where we are now? For those who want to read it, here it is courtesy of Rajiv: wellsfargosecurities.com Some excerpts: Our valuation model implies that the stock has downside potential of more than 30%, but we maintain a Hold rating on the shares of Applied Materials. Wouldn't a stock you expect to fall more than 30% to be a Sell? Why would one hold it if one really believed this? Intel was the first to equip a 200mm fab, but leadership proved costly, as poor yields (good die per wafer) on the all-new tool set overwhelmed intended improvement in capital efficiency. Yes, being first to bleeding edge technology has really hurt INTC. So much so that they are planning on doing it again this time around in the transition to 300mm. Does anyone proofread these reports before they are sent out? All told, we expect equipment sales to contract by 10% this year to $25.3 billion, which would nevertheless entail strong second half growth from current levels. In 2003, we project equipment market growth of 30–40% to $32.9–35.4 billion, and, by mid-2004, we expect industry four-quarter sales to climax at $38–39 billion, representing an approximate 19% decline versus peak four-quarter sales of $47.7 billion in the last upturn. She is basing her model on the next downturn which she expects to begin in '04? Well, I guess we have no upturn in equities this time since she already sees the end. DECLINING RETURNS We further believe that, if revenues in the coming cycle were equivalent to the last, profitability would still decline. In part, this is another side effect of the shift to 300mm equipment. Each 300mm machine sells for roughly 1.4x the price of a 200mm unit. At a given revenue level, an equipment company ships about 30% fewer units if its mix is 100% 300mm machines compared to 100% 200mm. Not surprisingly, equipment company margins tend to scale with unit run rates; so even if 300mm were not a revenue depressor, it would still tend to narrow profits. Narrow profits? This is my favorite. In a sector with enormous barriers to entry and consolidation underway, profits are going to narrow. She talks much of the history of the equipment sector and uses it at times to bolster her arguments and at others believes this time will be different. I don't see how one could argue the latter point as we are still in the nascent stages of a recovery. We believe that the move to 300mm will be more abrupt. Abrupt? The move to 300mm was suppsed to begin years ago, only to be interrupted by the various downturns we have been the unfortunate witness' to. Even if 300mm accounts for 50% of all chips by '05, that is about 7 years to get to 50%. This is abrupt?? Again, doesn't anybody proofread these before they are circulated? All in all, it would appear that alot of work went into creating a document with grand predictions, but little to back it up as history is certainly not on her side. Brian