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Technology Stocks : Etec Systems moving up -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Bob who wrote (1009)	6/21/1998 10:56:00 PM
From: Carl R.	Respond to of 1279

Robert it is only fair that I should be required to defend my statements, but I repeat, viewed as a supplier to the disk industry UTEK is incredibly expensive, so its value must come from somewhere else. Let's forget WDC which is projected to continue to lose money for quite some time, though buying parts from IBM could help it a great deal. Looking at some other PE multiples of disk sector companies we see the following: UTEK is currently in Q2, and for this year its PE multiple is 103. Using numbers for FY99 which begins in January its PE is 25. SEG is in Q4. For FY99 which begins next month its PE is 17. QNTM is in Q1 of 1999. For the year beginning now its PE is 16.2. Using projections for FY00 its PE is 8. VECO (67% of its revenue comes from disk manufacturing equipment), like UTEK is in Q2, and using FY99 numbers has a PE of 15.4. Using numbers for FY99 it has a PE of 10. The most stark comparison is between VECO and UTEK, which both supply the disk industry, both are dominant suppliers in their niche, and both are in the same quarter so comparisons are easier. UTEK has a PE multiple that is 2.5 times as high as VECO. Using P/S numbers does not change things. Comparing UTEK to QNTM the PE numbers for UTEK are 4 times as high. In my opinion the market has always been skeptical about the long term viability of the disk area because it seems inevitable that someday it will be replaced by some other form of storage (optical? biological? quantum?), so historically the disk sector has not carried monster PE ratios like some other groups such as networking. Thus I believe that UTEK is clearly being valued for long term earnings in some other area. For what it is worth, I have never had any position in UTEK, and do not follow them closely. I have no bones with the valuation, I just believe that it comes from somewhere other than the disk sector. As for the disk sector in general, I covered my shorts of SEG and APM way too early, and have a long term position in VECO which I have recently increased. Carl