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

To: Gottfried who wrote (4332)	7/26/2002 1:56:02 PM
From: Ian@SI	Read Replies (1) \| Respond to of 95383

G., It becomes permanent if there's a significant fundamental change. As I understand the fundamentals for this sector: 1. Global economy will continue to expand 2. Use of semiconductors will continue to grow somewhat faster than the economy at least for the next decade or 2. 3. Chip making productivity will continue to improve as per Moore's law. Until one of those fundamentals is irreversibly changed, I wouldn't expect the cyclical nature of this sector to come to an end. FWIW, Ian

To: Gottfried who wrote (4332)	7/27/2002 1:11:13 PM
From: robert b furman	Read Replies (1) \| Respond to of 95383

Hi G, Sorry it took so long to get back. Some things we know: Cohu has downsized to where they can maintain breakeven or slight profitability. With regards to a plateauing backlog in general.Future orders will be the result of more complex chips necessarily having more metal prongs coming out all sides of the chip thus requiring pick and place testhandlers.This is a megatrend that just marches on wether an economic advance or contraction takes place. With much capacity now not being utilized - this is the greatest cost for any business,old tech will get shut down and upgraded.For a few companies that really have bread and butter chips with huge volume 300MM will come onstream.I think they said there will be 5 production lines in production this years.300 mm will feature the best of all technologies .13 lines,copper and big wafers. By design all of that production will come to Cohu for testhandlers. That's probably about what Cohu can count on for cap ex situations. What will drive additional demand is a consumption of chips that justify the upgrading of old underutilized machines.I just don't know how that will come on. Cohu has no debt, good margins and a leadership role in testhandlers.They're spending 8.4 million in R&D so far. That's a lot of R&D.What that usually means is something like :Micron wants a new way to test and here's what the machine will do.If you build one that satisfies the specs we'll buy 100 of them.If that testhandler does it faster cheaper (which would be in the specs) then all the other competing chip makers will have to come behind us and buy more tools.That's when the growth and extra profits get made. When and if that occurs Cohu will surprise with robust numbers and bottom line some healthy profits. Its like MOrgan has said - we're beginning to see some of the Phase II orders in the recovery.That phase II is being deferred by some as the economy stalls is showing up in Nvls and some others. With Cohu trading 3-4 bucks over book - and book is a very low (depreciated number) these are times to average down and wait for Phase II to evlove. This time around Pase II will be without much of the Communications(infrastructure) build out.But yet look at all the new gadgets actually out there:Bluetooth,802.11,WiFi,PDA's,Cell phones that forward e-mail. These were concepts in past cycles - they exist now.As the implementation of this leading technology gets embraced and accepted,then even widespread another cycle will be enjoyed. Phase II will evolve - perhaps slower and not as robust -then again it might really be great.KVHI has sales going up 61% yoy on a quarterly basis.ALL of their technology is completely new and uses MANY chips. Cohu has not had it last hurrah. I believe we are much closer to solid growth with expanding profits now than any time in the last 2 1/2 years. I think we'll be surprised at how good things look in 03. This debtfree 50% margin leader will get a payback on its 8.4 million in R&D. They always have in the past - the track record is unblemished. The ongoing need for pick and place testhandlers is alive and well. Plus the new and also ongoing need for testhandlers to cool as the test occurs - drives more chipmakers to need to know Cohu. Both of these are ongoing long term trends. Cohu appears to need sales of 140 million for breakeven.I'm thinking 200 million is doable in 03.If they bottom line 10 % and make 20 million lets say a buck a share with a PE of 20 the past market cycle got there(excepting the last cycle which blew off at 30). We're looking at 20bucks a share.If they make 1.50 on unexpectedly stong business 30.00 bucks a share. If the market gets stupid and multiples expand higher we could see 40.00. If Amat or Agilent want to buy growth thru acquisition - 45.00 gets over their poison pill. So we've got a conservative shot at a 1 bagger being real and a 3-4 bagger being somewhat dreamy over the next 1-2 years. Cary thinks it is longer - he's going out 5 years.I can't even guess that long.Past cycles were quicker and recoveries surprised to the up side - I think it will be a longer cycle and I expect it to surprise on the quicker side vs a 5 year window. The fact is semi equipment companies went thru a massive distribution top.After major tops occur it becomes a longer term scenario to rebuild strength. I'm hoping for long multi year consolidations.That's what we've had now for almost 2 years. What has surprised me is the revisiting of 13 for the fourth time.I had hoped for a bottom to come in establishing a higher low and a step up to a nwewer level of sideways consolidation. Instead we keep shaking back down to 12 -13.Although its disappointing - from the long term view it is building additional technical strength. I've been in Cohu since 85.It's a stock that has benefitted with the continuous growth of the Integrated circuit. Nothing has really changed - except they've grown in the command of their market niche and their niche sector has blossomed from gravity feed to pick and place and now pick and place that cools. They also now sell tools that help in designing future chips in a way that gives them "cooled in" engineering.This may also add nicely over the future. In short - this little company will rise again.Most likely not to past highs - unless they grow a new segment of the business. They always have in the past and I'm betting they will again. It just requires long term wealth accumulation and longterm stockholder patience. It's really a nicer way to invest and live. We just have to get over the adrenalin rush of 2000. Our little jewel is building long term strength and short term marginal profitability while spending ALOT of money on R&D. I'm ok with that - because in the past it was always money well spent. In that regard - I must admit I'm giving management my blind faith.That really is what stockholders do.I do it with just a few companies (because I really know them in my mind anyhow) and I stick to the original gameplan. I'm not changing gears here - I'm holding over the long run. We will WIN AGAIN - In the LONG RUN. I'm Thinking Cohu in the 12-13 IS A SCREAMING BUY OF YEAR.- AGAIN. These guys are honest and they are good. That's just my opinion and I'm sticking to it and adding as often as I can. Bob Hope that helps.I know this has been a really tough week on us all.I really don't want to see anybody buy into all this dooms day stuff.Our economy is alive and well.America's technology will drive global efficiencies as we all grow - albeit slowly.Heck that's what this engineered slow down was INTENDED to do. It has been a rough week - but you know what - if you were short - wednesday's gain were held onto.Those gains were the second best in history - going back to 1987 - another major crash bottom. This is a time to be buying not selling.The shorts have been right a long time and I must give them credit for having made some wonderful gains. Make no mistake,it will be the panicing shorts that fuel our averaged down gains,when this market turns. I suspect we're seeing it right now. To be short now is to be greedy. The greedy will get theirs.gg