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

To: cluka who wrote (42838)	1/20/2009 11:43:52 PM
From: Pam	2 Recommendations Respond to of 95530

What cash is called for? What are you talking about? Well, that would be money already spent but not yet paid plus more to be spent as they go ahead with their planned capacity increases. WFR should create another $100MM in cash this qtr. There was no talk of additional investments for this qtr. Even if there is it will come from cash flow. Sure, near term CFs are fine but they will come down rather dramatically as ASPs for their products fall off the cliff. With lower demand, either they have to cut back on production or inventories will start piling up and consume some of their cash hoard. If you lower production, you lose market share and increase the unit cost of your production with lower utilization of existing capacity! Earnings are coming down, I doubt anyone expects them to stay as they are today. So you do agree that consensus analysts estimates are high and need to come down? Look at that model from UBS and my commentary. It is a very simple calculation. At $14.50 and a very severe cut to earning you get 13%+ return in 2009 and higher from there on. You show me a company that has a comparable return under such severe scenario. Well, as I said earlier, the Street will first wait for the estimates to come down. Then when they see signs that these estimates can be beaten in a quarter or two, they will start buying the stock! Until that happens, this stock is range bound between high single digit to high teens. Since the bad news is not fully out, bias would be towards the low end of the range.