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

To: Cary Salsberg who wrote (3283)	9/26/2002 8:46:34 AM
From: Proud_Infidel	Read Replies (1) \| Respond to of 25522

Troubled Nortel lowers forecast for Q3 Semiconductor Business News (09/25/02 11:01 p.m. EST) TORONTO -- It's gone from bad to worse for the communications industry. Nortel Networks Corp. late today said that it expects third-quarter revenues from continuing operations to be about 15% below the previous quarter. This compares to its previously stated guidance of sequentially lower revenues in the third quarter of "up to approximately 10%." Nortel also expects a marginally larger pro forma net loss from continuing operations per share in the third quarter of 2002, as compared to the second quarter of 2002. In addition, the company continues to assess its overall liquidity needs and expects to enter into discussions with its banks regarding its existing credit facilities. Further deterioration in spending by service providers, generally in the United States and for wireless networks in Asia, has resulted in the revised outlook, said Frank Dunn, president and chief executive officer of Nortel. "Despite the continued challenging market environment, our top priority remains to return to profitability by the end of June of 2003,” he said in a statement. “We are progressing well in our restructuring plan, and we will continue to monitor the market and the spending environment and take additional actions, as appropriate, to achieve our profitability goals." The company also announced today that it plans to present a proposal to its shareholders for a consolidation of its outstanding common shares (also known as a "reverse stock split") at its annual meeting planned for spring 2003. The consolidation ratio will be set by the board in early 2003 at a level which would be expected at that time to result in an initial post-consolidation common share price in the range of $10-to-$20, assuming receipt of shareholder and regulatory approvals.

To: Cary Salsberg who wrote (3283)	9/26/2002 8:49:31 AM
From: Mark Marcellus	Read Replies (1) \| Respond to of 25522

I was responding to the statement that there is no defined relationship between earnings and book value. ROIC is an example of an often used metric which defines that relationship. There are obviously all sorts of variables one needs to consider. Taking the other side of your example, there is more risk in anticipated future growth than there is in a stable company with good ROIC and a long history in paying dividends. You should expect to receive a risk premium for the former. Those who are really serious about these sorts of things should be using (and calculating for themselves) free cash flow instead of earnings, but if you're looking at results over a number of years, earnings is probably good enough. There's another metric I learned from someone that addresses some of what you're talking about. He calls it RORE (Return on Retained Earnings). The formula is: NI = Net Income RE = NI - Dividend RORE = (TY NI - LY NI)/((TY RE + LY RE)/2) From that he also derives his version of an internal growth rate (IGR). RR (Retention Ratio) = RE / NI IGR = RORE * RR Historically, AMAT does quite well under these metrics. A rule of thumb is that an RORE of 15% or above is quite good. AMAT often hits the 20's.