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

To: Donald Wennerstrom who wrote (30536)	5/18/2006 6:33:04 PM
From: Donald Wennerstrom	Respond to of 95515

This is a closer look at comparing 05 to 06. Through Apr, Bookings are up 1508 while Billings are up by 230 which results in a backlog growth of 1278. In other words, Bookings are up 38 percent for the 1st 4 months of this year compared to last year, while Billings are up 5 percent for the first 4 months. A nice way to start out the new year. - BOOKINGS - YR YR - 2005 2006 DIFF PCT MONTH (M) (M) (M) DIFF JAN 986 1226 240 24 FEB 1024 1293 269 26 MAR 988 1385 397 40 APR 999 1602 603 60 MAY 1015 JUN 1038 JUL 1007 AUG 1022 SEP 984 OCT 1094 NOV 1093 DEC 1143 TOTAL 12395 5506 -6888 -56 4 mth 3998 5506 1508 38 - BILLINGS - YR YR - 2005 2006 DIFF PCT MONTH (M) (M) (M) DIFF JAN 1259 1259 1 0 FEB 1331 1283 -47 -4 MAR 1273 1339 67 5 APR 1239 1449 210 17 MAY 1213 JUN 1152 JUL 1078 AUG 1056 SEP 1088 OCT 1146 NOV 1180 DEC 1224 TOTAL 14237 5331 -8907 -63 4 mth 5101 5331 230 5

To: Donald Wennerstrom who wrote (30536)	5/18/2006 7:17:13 PM
From: etchmeister	Read Replies (1) \| Respond to of 95515

6 months ago this was considered a bullish forecast - since you check vlsiresearch you probably red that forecast for equipment was upped to 23% - it sure is getting hot (repeat of 2004? so far it's almost copy exactly - on a positive note price trend for memory looks encouraging and foundries manage capex tightly) Equipment bought would almost complete the 4th technology node 66months/18months = 3.7; perhaps the equipment bubble is finally gone and we start realize the underinvestment from 2001, 2002, 2003 December 29, 2005 Semiconductor Capital Equipment Our 2006 Industry Outlook Sector View: New: 1-Positive Old: 1-Positive Investment conclusion We believe the semiconductor capital equipment stocks still have significant room for appreciation as the industry recovers, and as moderate increases in 2006-2007 revenue translate, through operating leverage, to sizeable increases in 2006 earnings. Summary ! We believe that total semiconductor capital spending (including equipment, land and buildings) can grow 5% in 2006, about the same as in 2005. But we think semiconductor equipment investment can grow faster (5% to 10%), as existing facilities are expanded and new ones are equipped to fuller capacity levels. ! Operating earnings leverage should be strong across the industry for 2006. In our view, the strong earnings potential for 2006 and beyond suggest that there is opportunity for 20% or better share price appreciation in semiconductor equipment over the next year. ! Having said this, it is important to note that in the near-term share prices may be sensitive to the first half 2006 pattern of orders (too strong or too weak a pattern would be bad news), and to perceptions on the outlook for the semiconductor equipment industry in the second half of 2006. ! We highlight the shares of Applied Materials, Novellus Systems and FormFactor, all rated 1-Overweight, as being among the most interesting to buy in this environment. While 2005 was a year of heavy investment by leading logic and DRAM manufacturers, we think this emphasis will be complemented by NAND Flash and foundry investment in 2006. The NAND flash investment is should be driven by high growth in demand for both memory bits and memory units, as flash enabled consumer and mobile devices continue to proliferate. The foundry investment is likely to be motivated by a combination of tightening supply, an increase in the demand for outsourced chip manufacturing service, and rapidly changing technology. Among the major projects slated for 2006 are the following: 1. Samsung, Line 15 2. Toshiba, Yokkaichi NAND flash plant 3. Intel, D1D and Fab 32 4. Intel and Micron, NAND flash joint venture facility 5. TSMC, Rampup of Fab 12 and Fab 14 6. Hynix, M6, M9, M10 facilities The diversity of the projects suggests strongly that the story for 2006 is not about investment by one or two segments of the semiconductor industry. It is likely to involve flash, logic and foundries. Our Recommendations Many companies are likely to benefit from the 2006 recovery. We think the most interesting ones to consider are those that are also likely to have specific drivers to their business in 2006. These include the following: Applied Materials – The recovery in foundries that we anticipate for 2006 should be an important factor for Applied Materials. The company’s business was hit hard by the weakness in foundries, and due to its exposure to this customer set, it would be among the equipment companies to benefit most from higher foundry spending. Novellus Systems – The trend to copper memory (i.e., replacement of aluminum wire interconnects on memory with copper wire interconnects) would be an important stimulus to Novellus’ business. It appears as though NAND flash could move rapidly to copper in 2006. FormFactor – The transition of NAND flash to high performance probe cards, and the ongoing adoption of DDR2 by users of DRAM, should be key themes for FormFactor in 2006. The company is facing robust near-term demand, and we believe it to be sustainable. Message 22016373