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

To: Donald Wennerstrom who wrote (11094)	8/21/2003 5:30:31 PM
From: Return to Sender	Respond to of 95640

Semiconductor Equipment . . . J.P. Morgan Securities raised its rating on Lam Research to overweight from neutral, telling clients "as the company is increasingly recognized as top-tier in every sense, and higher multiple stocks such as Novellus and Applied Materials are less enticing from a cyclical upside potential perspective, we believe LRCX shares will likely be among a group that experiences superior money flows." Lehman Brothers upgrades its sector view on European Semiconductors and Equipment to Positive from Neutral based on the coincidence of favorable trends on both the supply and demand side. Individually, firm is upgrading ASML Holding to Overweight from Equal Weight. Firm raises price target to EUR 18.0 from EUR 10.0. Lam Research was upped to Overweight at JP Morgan. According to the firm, company offers outstanding leverage as the net margin peak in the current cycle is likely to surpass the last by 400 basis points (16% versus 12%). Also, based on their models, the firm forecasts Lam to drive 44.7% of incremental revenues over the next three quarters to net income versus 38.6% for KLA-Tencor, 30% for Applied Materials, and 27% for Novellus. Credence Systems maintained Hold with $7 target at Deutsche Bank. Deutsche Bank says the wait is not over at CMOS. Firm says the company's EPS guidance is still light with operating expenses higher than expected. Firm is waiting for new products to ramp. Orders were guided up 10%, but firm sees no strong catalyst to influence its position, maintains Hold rating and $7 target. Varian Semi upped to Overweight at JP Morgan as the company is poised to gain share in single wafer, high current, the "fourth" ion implant market. According to the firm, in the move to 90nm and 300mm, it is clear that many chipmakers now plan to switch from batch high current ion implanters to single wafer for better throughput, dose control, and uniformity. Also, primary research that suggests competitors Axcelis and Applied Materials are behind the curve in developing and commercializing the single wafer, high current systems. On valuation side VSEA shares are trading at 12.3x firm's new peak C2005 EPS estimate of $3.05 versus our group average of 15.0x. Semiconductors . . . Christopher Danely at J.P. Morgan said he was now "more constructive" on the sector, citing improved fundamentals, combined with seasonal growth and an improving economy. Danely added that he was "surprised at the positive tone of business" at most semiconductor companies he visited over the past couple of weeks. He believes the wireless end market has exhibited the strongest order rates, boosting bookings at companies, such as RF Micro Devices, and bookings at PC chip companies have been in line or ahead of expectations. The wireline end market, however, continues to be sluggish, and could lead to results for Xilinx and Altera at the low end of projections. Boxmakers . . . Merrill Lynch comments on news out yesterday that Dell is cutting prices as much as 22% on enterprise-class products. Merrill Lynch suggests that Dell is taking these pricing actions to kick HP while its down. Dell management was surprised at HP's earnings miss but immediately went on the offensive, again showing great speed with price cuts coming within 24 hours. Price cuts went well beyond PCs, so DELL may be testing HP's ability to subsidize PCs with profitable products. While firm views Dell's action as a headline grabber to build momentum for the qtr, does not see it changing trajectory of the numbers. RobBlack.com MarketWrap robblack.com

To: Donald Wennerstrom who wrote (11094)	8/21/2003 5:32:54 PM
From: Donald Wennerstrom	Read Replies (1) \| Respond to of 95640

There has been a lot of discussion on valuation. Let's try it this way. Let's compare 10/8/98, with 10/9/02. These are major bottoms with different results for the Group and SOX versus the NASDAQ. I will state my observation as follows before presenting the table. I have always felt that in 1998, the semis and semi-equips had a "good, low" bottom. In other words, valuations through-out the NASDAQ, and the semi, semi-equips were "comparable" in terms of being at a bottom. Not so in the bottom of October 2002. The NASDAQ made a very "nice" bottom, but the semis and semi-equips did not follow suit. I always felt it was due to 2 major factors. First, the market "permanently" "marked up" the evaluation of the semis and semi-equips because of the tremendous run-up of those sectors during the Oct 98 to Mar 00 period. Second, the good first half of 2002 in terms of BtB, etc, kept the evaluations "high" for the semis and semi-equips so that even though they fell off tremendously in the fall of 2002, they never reached the comparable low levels of evaluation they reached in Oct 1998. Comparing the 2 dates of 10/8/98 versus 10/9/02, shows the Group up 21 percent, the SOX up 13 percent and the NASDAQ down 21 percent. So, if we "crudely" normalize the difference between 98 and 02, we can "normalize" the NASDAQ Oct 02 number as the new "floor" and say that relatively speaking, that compared to the NASDAQ in Oct 98 the Group bottom was 42 percent higher and the SOX was 35 percent higher. - 10/08/98 10/9/02 - CLOSE CLOSE PERCENT SYMBOL PRICE PRICE CHANGE AMAT* 5.59 10.41 86 ASML 4.38 5.28 21 ASYT 3.13 3.95 26 ATMI 11.50 12.44 8 BRKS 8.38 8.95 7 CMOS 5.00 6.30 26 COHU 6.75 9.99 48 CYMI 6.50 16.74 158 DPMI 17.88 16.07 -10 EGLS 7.94 1.21 -85 FSII 4.25 2.36 -44 HELX 7.88 7.48 -5 KLAC* 10.94 26.15 139 KLIC 5.19 1.95 -62 LRCX 2.93 6.72 129 LTXX 1.31 3.33 154 MTSN 2.75 1.65 -40 NVLS* 7.30 20.17 176 PHTN 2.25 16.15 618 PLAB 9.50 7.90 -17 SMTL 2.57 4.29 67 TER* 7.82 7.22 -8 UTEK 13.56 6.77 -50 VECO 21.63 9.40 -57 WFR 3.63 4.70 29 TOTALS 180.56 217.58 21 SOX-X 189.90 214.06 13 COMPQX1419.12 1114.11 -21 * STOCKS INCLUDED IN SOX INDEX