To: etchmeister who wrote (14903 ) 5/10/2005 2:45:35 PM From: Proud_Infidel Read Replies (3) | Respond to Semiconductor Capital Equipment's Overhang The research outfit indicated that PSC is raising its 2005 capex estimate to $1.66 billion from $1.28 billion, an increase of 89% from 2004. Firms leveraged to PSC's capex include Applied Materials (nasdaq: AMAT - news - people ) and Lam Research (nasdaq: LRCX - news - people ). CSFB sees 2005 worldwide capex declining approximately 4.7% to $42.8 billion--prior to PSC's revision, however, it estimated a decline of approximately 5.6%. Turning to memory prices, CSFB indicated that 256MB DRAM spot prices decreased approximately 40% from the end of fourth quarter of 2005 to the end of first quarter of 2005. The research firm did say, however, that "[prices] have stabilized since then, as incremental supply has been diverted to NAND." NAND prices remained stable during the same period, but have increased approximately 20% at the end of first quarter 2005. CSFB says that the key metric to monitor now is NAND flash prices, "especially into the third quarter when incremental supply should come online from large $300 million projects at Samsung (otc: SSNLF - news - people ) and Toshiba." The research outfit added, "We continue to believe memory capex will decline from approximately 50% of total bookings in the first quarter to a long-term average of approximately 25% to 30% exiting the year; increases in capex by memory companies does nothing to help the excess supply we see brewing in memory through the year." As a result, CSFB stated: "We believe declines in memory bookings will likely not be offset by a sufficient pick up in logic in the second half with foundries operating only at approximately 75% utilizations." CSFB concluded that, "declining [second] half-over-half capital expenditures, and the potential for double-digit declines in orders in September remains an overhang for investing in [semiconductor capital equipment] stocks near term." CSFB rates Applied Materials at "neutral" with a with a target price of $16.50 and rates Lam Research at "outperform" with a $29 target price.
