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Technology Stocks : Helix Technology, a cold play on semiconductor equipment -- Ignore unavailable to you. Want to Upgrade?

To: mopgcw who wrote (1034)	9/1/2002 8:58:10 PM
From: mopgcw	Read Replies (1) \| Respond to of 1227

More gloom from Barron's: Semiconductor-Gear Makers Still Sucking Wind By BILL ALPERT In August, the outlook for semiconductor production equippers went from cautious optimism, to cautious. Shares of leaders like Applied Materials and KLA-Tencor have given up 20% in the last week or so, as investors revised expectations for the second time since the sector peaked in the spring. Applied closed Friday at 13.36, while KLA closed at 32.91. The latest omens started appearing in mid-August, says Byron Walker of UBS Warburg in a Thursday morning note to clients. Business was disappointing for vendors, such as Kulicke & Soffa, whose products figure toward the "back-end" of the chipmaking process. Layoff reports floated around other back-end firms like the chip-testers Electroglas and LTX Corp. Because back-end firms have shorter leadtimes, Walker feared their cautionary news was a leading indicator of similar warnings from "front-end" suppliers, such as Novellus Systems, whose gear transforms raw silicon wafers into transistors. He downgraded Novellus, along with Lam Research. Sure enough, in a conference call later on Thursday, Novellus said that a couple of leading edge Asian chip factories had postponed expected follow-up orders. Chief executive Rick Hill trimmed his guidance for September quarter orders from flat with June, to a possible 20% decline to the range of $200-220 million. Visibility was murky throughout the semiconductor industry, said the Novellus chief, as consumer spending, the driver of the globe's halting economic recovery, falters. A writeoff will leave September's bottom line at break even, on operating earnings of about $17 million, or 10 cents a share. Morgan Stanley's Steven C. Pelayo revised his EPS forecast for the year to 23 cents, from 31 cents, and for next year to 55 cents, from 75 cents. The San Jose gearmaker's shares ended the week down a couple of bucks, at $24.46. The gloom returns: The Nasdaq Composite finished at 1315, down 4.8% for the week, on gloomy outlooks from the likes of Intel and Sun Microsystems. H-P met Street expectations, but its results revealed how battered the corporate computing market is. Friday, Merrill Lynch's Brett Hodess joined the Greek chorus and downgraded all the big equippers -- Applied Materials, KLA-Tencor, Lam Research and Novellus. Raw materials suppliers to chip factories tell Hodess that factory utilization levels at big Asian operations are faltering. Leading edge factories continue buying the latest technology, Hodess told customers, but in low volume. "It is going in with 2,000 wafers per month worth of equipment," writes Hodess, "instead of 10,000 as planned a month ago." Apart from what's happening in the real world, investors may start to look at different valuation measures for the industry, says UBS's Walker. After bidding up stocks like Applied Materials on rising order momentum early this year, Walker notes that Wall Street has reassured itself that subsequent share declines leave equipment stocks priced around the two-to-three-times book value level seen in the industry trough five years ago. But if the tech bear market continues, says Walker, investors may remember their discounted cashflow lessons and take another 30%-to-50% off the sector. Meanwhile, he's maintaining his Buy ratings on Applied and KLA, with next year EPS forecasts of $0.53 and $1.32, respectively, and share targets of 18.50 and 40.