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To: Lizzie Tudor who wrote (40110)	2/12/2008 7:12:49 PM
From: Bill Harmond	Respond to of 57684

Applied Materials Buy AMAT -$18.49 Price Target: $35.00 AMAT: Previous Solar Contracts Should Lend Upside To Orders THINK ACTION: Many solar contracts announced in 2007 are likely to be recognized in April-08 through October-08, lending at least a temporary stimulus to bookings. Beyond July, we also expect the capacity-strapped foundries to re-emerge as more significant spenders. With limited downside, we believe AMAT offers one of the best values in the capital equipment space. KEY POINTS: We expect orders of $2,100M (+/-$100M) for Jan-08. For April, we anticipate orders to jump to $2,400M (+/-$100M) driven partly by previously announced solar contracts. Other segments such as Silicon and Flat Panel are likely to bounce along the bottom. In April and July, we anticipate $500-800M in recognized orders from the solar segment—but note that most of these were contracts booked in 2007. We still expect the solar segment to remain under 15% of Applied's annual orders for the next few years. However, the contracts, as well as recognition of them as bookings, can be particularly lumpy. Although foundries have announced significant reduction in 2008 spending, much of the spending for early 2008 was already reflected in 2H:07 orders at Applied. We believe that utilizations are likely to tighten significantly from May onward and that foundries should step up their spending. We also anticipate modest improvement in flat panels in 2H:08. We believe that Applied should revert to normalized run rate of about $2.5-3B a quarter over the next four to six quarters. Flash memory should continue to be a driver as more laptops offer solid state and hybrid hard drives. The hard drive memory requirement per laptop is likely to be orders of magnitude higher than other applications such as portable communication devices and MP3 players, which have hitherto driven flash adoption. Solar segment should add $200-300M on average per quarter. Our $35 price target reflects an average quarterly bookings level of $2.8-3B over the next four to six quarters, 20% normalized peak net margins, and a 20 multiple. We believe the multiples for the group are likely to trend higher with the recent drop in 10-year note yields.

To: Lizzie Tudor who wrote (40110)	2/12/2008 7:16:12 PM
From: Bill Harmond	Read Replies (1) \| Respond to of 57684

Interesting. I don't think FSLR has a corner on thin film, you know the efficiency issues better than I do for sure. Last September during their presentation STP said they had thin-film plans of their own for example. but it could have been FUD-sewing.

To: Lizzie Tudor who wrote (40110)	2/13/2008 1:41:53 PM
From: Archie Meeties	Read Replies (1) \| Respond to of 57684

AMAT doesn't manufacture or even design thin film. They have taken their expertise in the manufacture of LCD's and applied it to the production of thin film. The semiconductor they are applying their manufacturing technology to is amorphous silicon, which is cheap and in good supply, but doesn't have the efficiency of the exotics (CIGS, CT). The process that AMAT has can make tandem junctions, so that an amorphous layer can sit on top of a microcrystalline layer, which would boost efficiencies. AMAT does have the lead in creating very large thin film (> 5m^2) atm and so efficiency of scale. I own both AMAT and FSLR, but I think the upside for AMAT is greater as they will have a perfect storm in 2h of 08 of the semi equipment cycle turning up as well as solar. One of AMAT's partners/customer is Oerlikon. There's enough demand for several AMAT's and many FSLR's atm, so I don't see competition becoming an issue for years.