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

To: Sarmad Y. Hermiz who wrote (11007)	8/16/2003 1:26:58 AM
From: Donald Wennerstrom	Read Replies (1) \| Respond to of 95737

Sarmad, It seems to me you have raised a very large subject that could keep conversations going for a long time, but let me respond this way. For a company to start in the very beginning, capital must be raised - one way is through the stock market. If the company has the right product, sales are strong and the company can "make money", ie, it takes in more money than it has to put out to build the product. Now that the company has "excess cash" it can "spend" that money in several ways - I won't go into all the ways, but we know dividends could be paid to the share holders, options can be given to key employees, etc. However, one big item of expenditure for "high tech" companies is to plow a lot of their "profits" back into the company to build new products through the expenditure of R&D funds. For the most part, companies such as AMAT, use this route to build the business. For instance, in AMAT's financial statement for FY-02, R&D expenses are listed at 1,052 Million dollars. Total Revenue was listed at 5,062 Million dollars. That means that nearly 21 percent of total revenue was spent on Research and Development to develop new products. If that money was given back to the stockholders in some way, say via dividends, that's great, but that means less products would be developed, and over time, AMAT would more than likely lose business share and at some point go out of business. Of course all this depends on AMAT spending their R&D funds wisely, through good management, and making the business grow. In AMAT's case you have to say that over the years they have been the most successful in following this process, because they are far and away the biggest semi-equip company in the market place. Don