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

To: Donald Wennerstrom who wrote (31406)	7/12/2006 11:43:47 AM
From: Proud_Infidel	Read Replies (3) \| Respond to of 95663

The SOX is trading around pre-bubble 1997 levels(no growth in 10 years!!!!), yet worldwide semi revenues are hitting all-time highs year after year. So please tell me why semi stocks should continue down? finance.yahoo.com I am not saying they cannot, or will not, but would love to hear analysis that includes something more than pointing to a trend line.

To: Donald Wennerstrom who wrote (31406)	7/12/2006 11:47:25 AM
From: Donald Wennerstrom	Read Replies (1) \| Respond to of 95663

CSFB has been attending SEMICON West. Here is their summary observations on Day 1. <<SEMICON Day 1 Update: Did the order peak just pass us by in 2Q? Day 1 update. We attended well-attended analyst/investor briefings from AMAT, CMOS, KLAC, ASML, LRCX on day 1 of SEMICON West, an important industry trade show for our companies. In addition, we also met with Nikon, CYMI, TEL, BRKS and Advantest. Top 3 takeaways from day 1. (i) Memory firing on all cylinders now – Memory orders are clearly driving most if not all the upside in 2Q – we think Micron/Inotera orders moving the order book; (ii) Management cautiously optimistic – Management tone was far from one of capitulation, but in all fairness one of cautious optimism instead; upside to 2Q orders and visibly robust traffic and activity at booths and investor events helped propagate this sentiment; and on the product/technology front, (iii) Immersion is on the right track – ASML/Nikon have become incrementally more positive on the prospects for deploying immersion in production – we think this is the best lead indicator to judge NAND prospects next year. Did the “order peak” just pass us by? KLAC’s presentation was clearly the highlight of the show today. Note that we are restricted on KLAC, so our comments are factual. KLAC revised its June order guidance from flat to up 20% to a range of 25-30% q/q, implying orders of $767mm-$798mm; versus prior peak of $607mm in June’04, and $600mm in Dec’00. KLAC’s robust 2Q order pre-announcement helped drive a rally in SCE stocks yesterday. KLAC’s strong order increase in June sets up harder comps for Sep, but comments that Sep orders will “decline, but not by as much as usual”, and TEL’s comments that Sep orders will decline ~15% q/q both increase the odds that the “order peak” may have passed us by in 2Q. SCE implications. We think there are three things worth talking about for SCE: (i) Memory supply/demand – despite the higher memory orders in June, we think memory has not been irrational (thus far) – see analysis from our preview on Monday – if you agree with us that memory capex can be up in 2007, perhaps SCE deserves some credit for leverage to strength in this vertical; (ii) Depth and duration of trough – if order declines are driven just by memory seasonality and lumpiness and not memory cyclicality, the depth and duration of the impending order decline could be more muted than historical and (iii) Fair value for stocks – we think SCE stocks are trading below fair value, if you think CY06/CY07 earnings (on flat capex next year) represents normalized earnings for the group. Bottom-line. No need to get carried away on one positive data point from KLAC – we still have not heard from Samsung (important given negative chatter on NAND demand, SEC reports Thursday), views on tech end-demand/chip inventories and Sep order guidance (no explicit down guidance yet) all will help address the important depth and duration questions that will now open up for debate.>>

To: Donald Wennerstrom who wrote (31406)	7/12/2006 12:28:26 PM
From: Return to Sender	Read Replies (3) \| Respond to of 95663

Volatility means trading opportunities. That's what I take away from the article. It's possible that the SOX did not reach its ultimate trading low in October 2002 but if that's true then the entire market is headed much, much, much lower. I don't think that is actually true. The bottom line is simple. Even before the bubble stocks in this sector were extremely volatile. The unusual period of trading was in 1999. Too many people believe that the gains seen from 1996 to early 2000 will be repeated. How likely is that? Prior to the top in 2000 there was a lot of volatility except in 1999. Bubble like gains will be found but it will probably be in some other sector of the market rather than in these stocks. That does not mean there won't be excellent trading opportunities. I think we are headed towards a great buying opportunity now. Short interest was growing in the sector. Part of the upswing yesterday had to be some of that unwinding. But it will likely be even higher short interest at the ultimate bottom. Time will tell but unless I am totally wrong in a few months we could find enough of a dip here where stocks can be bought and held for a year or more for some terrific percentage gains. After that... well more volatility. Take a look at the chart. Be sure to log into StockCharts.com on this window first to see this weekly chart all the way back ten years. Have we hit an RSI(14) of 30 on the chart like at past long term market bottoms? We have not hit an RSI of 30 yet, maybe we won't, but the SOX could hit an RSI of 30 more than once before an ultimate bottom is formed. RtS