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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (44630)	9/18/2003 6:25:47 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

Applied Materials Says Industry M&A Could Be Slow Thu September 18, 2003 03:31 PM ET By Daniel Sorid SAN FRANCISCO (Reuters) - High stock prices will hinder merger and acquisition activity in the $20 billion semiconductor equipment industry as it recovers from its worst slump ever, the chief financial officer of chip equipment company Applied Materials Inc. AMAT.O said on Thursday. Still, Joseph Bronson said his company will look to build its consumable products business through acquisitions as well as internal growth. "I think there'll probably not be a lot of consolidation as we get into an upturn because of valuation," Bronson told investors at a Banc of America Securities conference. "In the equipment space a lot of things could have happened but didn't," he added, because of executive personalities and "ego," as well as stock valuation. Investors have been betting for more than six months on a chip industry recovery. The Philadelphia Stock Exchange semiconductor index .SOXX has gained almost 80 percent since February. Shares in Applied Materials have moved almost in lock-step with that rally, gaining just over 80 percent since early March, boosting the company's value to $34.5 billion. Santa Clara, California-based Applied Materials, the largest provider of the equipment used to build circuits on discs of silicon, has honed in on growing its consumable products business, Bronson said. Products such as pads and slurries are regularly reordered by chip producers, providing a steadier stream of revenue. "We have a major focus on making that business bigger," Bronson said. In response to a question, he said the company expected to grow the business both through acquisitions and internal development. Sales of equipment used to build, test and package microchips has suffered in the past three years following a period of over-investment in the late 1990s by chip makers. Bronson said the company's spare parts business has picked up, which could suggest that chip factories are busier and operating closer to their capacity limits. MIXED MESSAGES ON STOCK VALUATION While the market's sentiment on the semiconductor equipment sector has turned up, two Wall Street firms issued differing opinions on shares of chip equipment makers on Thursday. Goldman Sachs analyst James Covello said he has become more negative on the sector after talks with global industry executives at an Asian technology conference. Covello said orders for new equipment in the fourth quarter could suffer as some chip factory projects are pulled into the third quarter and some pushed out to the first quarter. As such, he said stocks in the sector could fall 15 percent before going back up amid a widely expected business recovery. Meanwhile, JP Morgan analyst Jay Deahna said shares of KLA-Tencor Corp. KLAC.O , the largest maker of process control equipment for chip makers, remain a good buy despite comments from other analysts that they are overpriced. Deahna added the stock to a "focus list," saying it trades at a discount relative to Applied Materials and Novellus Systems Inc. NVLS.O He expects the stock to trade at $77 in 12 months. Shares of KLA-Tencor were off 81 cents, or 1.4 percent, to $56.60; Applied Materials stock was down 28 cents, or 1.3 percent, to $20.84; and Novellus stock was off 6 cents to $38.35 in late Thursday Nasdaq trading.