Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Justa Werkenstiff who wrote (3755)	12/12/1997 12:15:00 PM
From: Thomas J Pittman	Respond to of 10921

Nice Post. Here is the Motley Fool take: FOOL ON THE HILL An Investment Opinion by Randy Befumo Asian Contagion Claims Another Semiconductor capital equipment companies underwent a savage beating today as investors fled industry uncertainty. A profit warning from Kulicke & Soffa (Nasdaq:KLIC - news) as a result of continued economic turmoil in Korea initiated today's debacle. Investors are concerned that economic upheaval in East Asia and Japan could cause spending for semiconductor capital equipment to dry up. Imploding currencies, massive debt loads, and slowing economies throughout the region could all contribute to lower capital spending. Many investors figure that if major Korean manufacturers like Hyundai are choking right now, things will only get worse in the future. Since the late October turmoil in Southeast Asia, semiconductor capital equipment manufacturers have been under pressure. The average semiconductor equipment manufacturer in the Motley Fool Semiconductor Capital Equipment Universe has dropped 14.0% so far this month. Even more shocking is the 38.6% haircut the average company in this group has seen since the fourth quarter began on October 1. Although as a whole these companies are still in positive territory for the year with a 24.1% average return, at this point these companies have underperformed the S&P 500's total return of 34.9%. Kulicke & Soffa re-ignited tensions this morning when it reported that it would not make fiscal first quarter earnings estimates $0.38 per share. The largest manufacturer of wafer assembly equipment in the world said Hyundai and another unidentified Korean customer had pushed out orders for 110 wire bonders, reducing first quarter sales by approximately $9 million. Hyundai now wants 80 of the bonders in question to be delivered in February, although these orders could be further delayed. The other 30 bonders are pretty much toast, as the company that wanted to buy them could not get a letter of credit. In addition, Kulicke is also having some production problems with its 8060 wedge bonders, which will shave up to $5 million more off the quarterly total. This is the first concrete sign from one of these companies that the Southeast Asian turmoil is more than hype. Although many took Oracle's warning earlier in the week as the watershed moment, for this particular industry the impact on Kulicke is much more relevant. In addition, Lattice Semiconductor (Nasdaq:LSCC - news) reported today that it had $3.5 million in revenues in potential jeopardy due to the insolvency of its South Korean distributor. As South Korea is the 11th largest economy in the world and constitutes about 10% of the sales of all semiconductor capital equipment, hairline fractures in the corporate infrastructure like this are a real economic event that creates some concern. Korea's most significant semiconductor export is memory chips. With the prices on memory chips still under siege and the Korean currency collapsing, it is not hard to see scenarios where companies like Samsung join Hyundai in pushing-out orders. Investors who remember the last downturn in semiconductor capital equipment are seeing some eerie similarities. When Kulicke reported push-outs by Taiwanese customers and problems with its 8020 turbo gold ball bonder in late 1995, this was the first sign of trouble for the semiconductor capital equipment industry. Although at the time Kulicke declared the issues short-term problems and continued working on a secondary offering, it turned out they were actually an excellent leading indicator for a downturn in the cycle. In retrospect, Kulicke's emphasis on the secondary offering was seen by many investors as an uncanny call on the top for the equity value of the company. As Kulicke had a three million share secondary offering back in May and now it is having problems with another key piece of equipment, some believe history is repeating itself. All of this fear has created the most attractive set of valuations on semiconductor capital equipment manufacturers in the last few months. With a variety of companies sporting solid balance sheets and starting to edge toward the low end of their historical valuation ranges, today's turmoil appears to offer investors the first compelling entry point since late 1996. On a relative basis the larger manufacturers have actually been hit harder, with Applied Materials (Nasdaq:AMAT - news) , KLA-Tencor (Nasdaq:KLAC - news) , and the decently diversified Teradyne (NYSE:TER - news) all trading for around 2.0 times their enterprise value (price). The five-year lows in the price/sales for these three companies are between 0.7 to 1.0, while the five-year highs range between 5.0 to 5.5. Although they have not hit near absolute panic valuations, the South Korean problems would have to kick off a major slowdown across all semiconductor capital equipment product lines to justify some of today's prices.