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

To: William Nelson who wrote (4494)	1/19/1998 9:54:00 AM
From: Mason Barge	Read Replies (1) \| Respond to of 10921

The semi equipment sector naturally tends to rise and fall with the btb, since the mulitples are high and prices include future growth and even acceleration of future growth. Essentially, the downturn on Asia problems represents an attempt by the market to predict the btb, since we saw the crash during a period when the current btb was strong, and in the case of test equipment, very strong, in the 1.2 range. (I personally think the market overreacted by putting test and automation issues (TER and EGLS and ASYT and PRIA and similar issues) in the same basket with the front-end companies. Of these four, at least Asyst Tech. has some significant Asian exposure, but its orders haven't suffered like, say, Cymer or Canon. The price downdraft for the test companies, though, should have been much less severe, and I think they're comparatively undervalued. TER especially has very little exposure to Asia and is buffered evenfrom the semiconductor market, since it has a lot of business in non-computer IC and board testing, especially in telecommunications. There was no reason for it to fall so far -- an opportunity for savvy investors.) Anyway, to get back to the point, you'd have to think the market would, by now, slowly smooth out the cycle somewhat. It rises too far when hotheaded investors overbid issues (again, Cymer is a great example), a variation of story-stock hysteria. You'd have to think that at least a decent percentage of these people are learning their lessons. And on the other side of the coin, you'd have to think that investors would realize, by now, that the semi equipment shares are going to come roaring back evetually, absent a total meltdown in the global economy. The "big boys" are right on top of this, buying up bankrupt companies and expanding investment. I saw an article in the Atlanta paper Sunday about Coke (which gets good coverage here, LOL). They're using this crises to EXPAND capitalization in Asia, even though they expect sales to decrease in the near future. While this is way off the area of tech stocks, it shows why well-managed companies command such huge multiples. Anyway, bottom line, I think we would have seen a shorter fall this time except for Asia. Real risks in the Asian economies have increase the potential downside for semi equipment companies. The market has reacted logically by driving down stock prices, but overreacted because of hysteria. If you want to get a grip on the market, watch Novellus tomorrow. It will be interesting to see what effect their earnings report has on the share price. While the earnings report itself is difficult to understand, because of a slew of "extraordinary items", Novellus reported an enormous backlog increase. If this drives the price up to 40, it will be an indication that the market is ready to correct upwards. If not, it means that the market is still skeptical and the rash of coming earnings reports isn't going to help.

To: William Nelson who wrote (4494)	1/19/1998 11:48:00 AM
From: Clarksterh	Read Replies (1) \| Respond to of 10921

WN - What is your analysis of the previous semi-equip downturn? Did the semi companies not need new technology then? In '96 (the last significant downturn) the semi equip companies were overcapacity, but they had also just recently upgraded a lot of their equipment with the build to overcapacity. As a result they stopped spending for more capacity, but they didn't need any upgrades either, and they bought very little equipment for almost 1-1/2 years, which is a long time in the semi industry. The result is that many of the semi manufacturers are now at least one step behind on technology, even if they are still a little overcapacity in some areas. Hope this answers your question. Clark