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

To: Gottfried who wrote (14825)	5/7/2005 10:08:13 PM
From: Sarmad Y. Hermiz	Read Replies (1) \| Respond to of 25522

Gottfried, Obviously IC production is at record levels. And also obviously the amount of equipment needed to produce all those IC's is adequate to produce them. Otherwise the IC's couldn't be produced. The only puzzle has been why so little new equipment is required. We've said many many times the reason is that the old equipment is apparently adequate. What was in-adequate was our mental model of how quickly semi-equip becomes obsolete. A few years ago one used to see the terms "technology buys" and "capacity buys". Apparently no one needs to make capacity buys these days, since capacity utilization is in the 85% range (for run-of-the-mill devices). So our model needs some tweaking. It seems the current level of "technology buys" is serving the parallel duty of adding just enough to capacity so that there is no need for explicit "capacity buys". Where our model can benefit from explicit detail is to know what % of IC's need brand new technology., and whether this % has been increasing or decreasing. Regarding investment in stocks, we also need to see whether the over-head and manufacturing capacity of AMAT et-al is over-staffed in the hope of reviving capacity buys. So possibly they sell their machinery at low margins in order to generate sales that keep the shop floor busy. But these sales are not very profitable. If this is the case, then AMAT is a long way away from being a good stock investment. AMAT and Novellus, etc... will be good stocks when the companies decline sales to fabs because the buyer is not paying up a high margin. When in a CC, the CEO says: "we could've sold 10 more $10m machines, but we didn't like the terms", that's when the stock will be poised to shoot to the moon. Until then, the company is being run for the management and employees; not the stock holders. Sarmad

To: Gottfried who wrote (14825)	5/9/2005 11:54:46 AM
From: Proud_Infidel	Respond to of 25522

FWIW: Novellus' Q2 Order Upside 'Appears More Limited' 05.09.05, 11:47 AM ET Bear Stearns maintained an "outperform" rating on Novellus (nasdaq: NVLS - news - people ) with a target price of $33. The chip-equipment maker has been hindered by poor margin performance, but the research outfit sees a positive change: "Our checks suggest that Novellus is getting much more serious about margin improvement. If this is remedied, we believe that investors would be very encouraged by the resulting risk/reward proposition." Bear Stearns sees the appointment of John Chenault as chief financial officer on an interim basis as an indicator that "margin improvement is now clearly being made a high priority. Chenault has strong operational experience at Novellus and will push to get the company back to its historical margin ranges." While the research outfit sees June [second] quarter guidance in line, it said that "order upside appears more limited than we had initially believed." Bear Stearns added, "The bottom in fundamentals appears to be here, but the rate of reacceleration remains up for debate."