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

To: Proud_Infidel who wrote (11011)	8/16/2003 10:19:47 AM
From: Sarmad Y. Hermiz	Respond to of 95738

>> there is no connection between AMAT stock price and its ability to do its business. Hi Brian. Let me make clear my intended thought. The Price of AMAT stock neither helps nor hurts Applied's ability to carry on business activities. Applied does not sell stock in order to generate capital to build fabs. Although there is a slight connection. Which is that AMAT stock is used as compensation instead of cash wages, so it is nice to have a high price. But even if the stock price was just a penny per share, it still could be used as compensation. >> I simply cannot believe that YOU believe that: there is no connection between AMAT's business (and business results) and the price of AMAT stock.....IMO, this statement is ludicrous. Let me see how I arrived at that belief. Let's plot the price of AMAT with the earnings of Applied. I don't think there is a correlation. You have to add sentiment to the equation, because the business performance factors don't account for the move. To your questions. chart AMAT's stock price and compare it to their cash levels from '98 until the present. They went from $1.4B(??) in cash to $5.23B during one of the worst times ever for the sector......question 1: what will happen once the sector turns and they can really generate cash from a renewed upcycle? Answer- Your question illustrates the disconnect between Applied financial performance and AMAT stock performance. At the start of '98, AMAT was at $7. It had a great year. Earning 15c/share (current shares). And stock price went up to over $10/sh. A 50% increase. '99 was another great year. earnings 47c, AMAT from $10 to $34. A 200% increase. I guess we see a pattern here. '00, gee, a fabulous year. Earnings $1.20. And the stock went from 34 to 19. The best earnings year ever, and stock gets cut in half. '01. Earnings 30c (halfway between '98 and '99), and the stock goes stays flat. From 19.xx to 20. '02. earnings 16c. A bit better than '98. So we should expect AMAT stock to behave like '98. Instead it drops from 20 to 13. Total opposite. So where is the correlation ? 15c of earnings are associated with 50% stock price increase, or 30% decrease. But I don't take offense with your characterization of my statement as absurd. Because in fact the performance of the AMAT stock price relative to the business performance of Applied is in fact absurd. Questions 2 and 3. Yes I do think Applied will prosper, and AMAT will increase in price beyond the expectations of the green-eye-shade-accountants. I was just telling Don that AMAT's price does not correlate to the data contained in his tables. Cheers. Sarmad