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Strategies & Market Trends : The New Economy and its Winners -- Ignore unavailable to you. Want to Upgrade?

To: fedhead who wrote (13807)	9/5/2002 7:54:39 PM
From: Bill Harmond	Respond to of 57684

From BofA Securities today: Each generation since the industrial revolution has experienced the development of key technological breakthroughs that resulted in new products and industries never before imagined. Investors have been willing to pay large multiples of future earnings or cash flows for shares in these businesses to discount the potential for growth. For example, the P/Es accorded to color television manufacturers peaked in 1959, a few years after its commercial development produced an attractive product. As competition developed these multiples declined, first to reflect the reduction in profitability that resulted. Then, as the market became more saturated, the multiples collapsed further to discount the newfound cyclicality of the industry. ♦ We believe that the semiconductor industry faces a reduction in its longterm growth prospects, not just because of the uncertain economic outlook, but because of much more saturated end market opportunities for integrated circuits to penetrate. We believe that there is significant risk that investors’ attention will shift from concerns about the cyclical slowdown towards a focus on this expected lower secular growth rate. ♦ We anticipate further cuts soon of 15-25% for 2003 consensus estimates, and expect the SOX to find a bottom 30% below today’s level.