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To: etchmeister who wrote (1394)	6/11/2007 11:01:43 AM
From: niek	Read Replies (2) \| Respond to of 43609

June 11, 2007, 9:08 am Semi Equipment: Pacific Crest Turns Cautious, Cuts Ests on AMAT, NVLS, CYMI, ACLS Eric Savitz Pacific Crest’s Mack Bachman this morning cautioned of new headwinds for the semiconductor equipment group, and lowered his estimates on Applied Materials (AMAT), Novellus (NVLS), Cymer (CYMI) and Axcelis Technologies (ACLS). He advises investors who want to stay invested in the sector to focus instead on Varian Semiconductor (VESA) and ASML (ASML). Bachman warns that capital spending by the chip business could “fall significantly” in 2008. “If memory manufacturers continue to expand capacity according to plans,” he warns in a research note, “we see an increasing likelihood of prolonged overcapacity. This scenario could lead to a 5% to 10% reduction in capital spending in 2008, resulting in a prolonged headwind for semiconductor capital equipment stocks.” Bachman notes that spot pricing for DDR2 memory has dropped 70% year to date, and that prices are at or near the cash cost to manufacture the chips in 300 mm fabs. “If price remain low, manufacturers will likely delay or cancel plans for expansion,” he says. Bachman notes that there have been order push outs from both Hynix and Samsung, and that “second-tier DRAM manufacturers such as ProMOS are at significant risk of reducing spending.” Over the next two quarters, he warns “negative announcements, such as order push-outs, capital spending cuts or fab delays, are more likely than positive announcements.” Here are a few details on his calls on the four companies he mentioned in his call: * For Applied Materials, Bachman is cutting his revenue estimate for October 2008 fiscal year to $10 billion from $11 billion. * Novellus, he says, “is overvalued on recurring takeover rumors,” and warns that the stock has downside to $23. He cut his 2008 revenue estimate to $1.6 billion from $1.7 billion. * Cymer, he says, is losing market share to rival Gigaphoton; he says orders from Cymer’s biggest customer, ASML, have been “well below our previous expectations.” He reduced his 2008 revenue estimate to $562 million from $612 million. * Axcelis, he asserts, “has product issues.” In particular, he says its Optima implant products are having “reliability issues,” and that it is losing market share to Varian. He cut his 2008 revenue forecast to $509 million from $539 million. This morning, Applied Materials is down 12 cents at $18.67, Novellus is up 10 cents at $29.38, Cymer is up 18 cents at $41.16 and Axcelis is down 5 cents at $6.21.