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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (2992)	10/23/1997 5:09:00 PM
From: Ian@SI	Respond to of 10921

[ON - topic, for a change] ;-) Headline: Semiconductor Equipment: DRAM Equip. Investment An Opportunity Not A Risk Author: Edward C. White, Jr., CFA Company: AMAT, KLAC, KLIC, LRCX, PRIA, TER, LTXX, NVLS, EGLS Country: IND CUS Industry: ELECTS,SCITEC,SEMICO Today's Date : 10/22/97 * There has been concern about recent DRAM pricing trends and the adverse impact this may have on semiconductor capital investment. Our work suggests that there is upside rather than downside to DRAM related equipment demand. * We have done several regressions to determine whether changes in DRAM prices are a significant factor behind changes in semiconductor equipment revenues. The R-Squared values from most of these regressions were low (under 50%). * The highest correlation was between price/bit changes over a 9-month period and subsequent yr/yr changes in equipment spending. Spending usually does not decline unless DRAM prices are down 33% or more over a 9-month timeframe. * The statistics confirm intuition. Chip capital budgets tend not to get cut unless DRAM price declines are worse than normal learning curve declines for a long time. Currently, price/bit numbers are down 8% over the past 9 months. * Many equipment companies now derive a smaller percent of revenues from DRAM chip makers than previously, but have not assumed a DRAM recovery in their guidance to analysts. This creates the potential for upside EPS surprises. Highlights: 1. We will host a conference call at 10:30 A.M. today to discuss our generally constructive outlook on the semiconductor production equipment industry, and our DRAM regression analysis. Please call your Lehman Brothers sales representative for more details. 2. Among the companies which stand to benefit the most from a pickup in DRAM based semiconductor capital investment would be KLA-Tencor (KLAC, $61 7/8, Rated 2, Footnote C). At the peak of the DRAM cycle, the company derived 40- 50% of its revenue from DRAM chip manufacturers. The percentage is now down to 10%-15%. Moreover, although the company is optimistic on its short to intermediate term outlook, it has not factored a major recovery in DRAM related demand into its outlook. If DRAM manufacturers' spending recovers, EPS estimates for KLA-Tencor have to go up.

To: Cary Salsberg who wrote (2992)	10/24/1997 3:05:00 PM
From: Sam Citron	Read Replies (1) \| Respond to of 10921

Cary, With all due respect, why wait for AMAT conference call? You didn't wait for Morgan's clarion call to begin buying last year. The stock met your entry point and you bought. It is now over a year later and the uncertainty in Asia has presented what appears to many on this thread to offer a good buying opportunity. Has the Asian crisis caused you to change your Y2K forecast of over $100 (post-split)? CC is not going to address Y2K, only 1998. And it is already highly likely that '98 guidance will be lowered due to the Asian mess. The market has probably been appropriately discounting this for months. Could you please define what you regard as reasonable entry prices these days so we need not wait for the Big Event. SC