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

To: robert b furman who wrote (42802)	1/19/2009 5:14:57 PM
From: Donald Wennerstrom	Read Replies (2) \| Respond to of 95520

Bob, Good to hear from you. It would be nice to see an early upcheck in Bookings and Billings sooner than later obviously. INTC sparked a little upcheck in last week with their quarterly report implying some rather heavy cap ex spending in 1H09, but here is another view of the event. <<Intel: Don't Buy the CAPEX Head Fake January 18, 2009 EVENT: 2009 CAPEX GUIDANCE. On its Q4 report Thursday, INTC announced that 2009 CAPEX would be “flat to down slightly” Y/Y vs 2008 levels of $5.197B. CAUSE: 32nm MIGRATION. On its conference call, management stated that the “predominant majority” of 2009 CAPEX would be spent on its migration to the 32nm node. IMPACT/ACTION: AVOID POSITIVE HEAD FAKE. The Street is currently looking for CAPEX to be down Y/Y. So while INTC’s guide of roughly flat Y/Y CAPEX may appear positive at first glance for semi equipment companies (many semi equipment names are trading up despite the NASDAQ being down slightly at the time of this writing), we remain negative on semi equipment and believe that investors should not buy this positive “head fake” data point for the following three reasons: 1. Company-specific technology, not capacity, buy. INTC stated that 2009 CAPEX will be used primarily for its migration to the 32nm node to increase its performance lead vs AMD and lower production costs. The funds are earmarked for “technology buys,” not “capacity buys.” 2. Sharply declining utilization rates. Management stated on the conference call that factory utilization is coming down “dramatically” in Q1, and isn’t expected to return to normal levels until the second half at the earliest. Thus there will be no capacity buys any time soon. 3. CAPEX may be cut from these levels. INTC was asked on the call if its CAPEX plans could be more “conservative.” Management responded that the non-32nm component of the budget could be cut based on demand. There is nothing in the supply chain suggesting a demand uptick any time soon. Thus we believe INTC’s CAPEX guidance is company-specific, and not indicative of semiconductor spending in general. Rumors are in the market that leading CAPEX spender Samsung (SSDIF.PK) could cut its budget in half, and TSM has already indicated that its 2009 CAPEX could be down -20% Y/Y. We remain negative on AEIS, AMAT, ASML, KLAC, LRCX, MKSI, NVLS, and other semi equipment names.>> news.aol.com