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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Vartan who wrote (21558)	7/11/1998 11:37:00 AM
From: Big Bucks	Read Replies (3) \| Respond to of 70976

Vartan, Those of us that have owned this stock for many, many years have seen this kind of performance over and over again. This is still a cyclic, growth industry, with extreme price/business swings in both directions. At some point demand will outstrip supply and new products/technologies will kickstart the cycle all over again and then 300mm technology will be the rage as new fabs are built. I feel very comfortable expecting a 2x-4x gain in less than 3 years, demand will be there, progress marches on. It is irrefutable. Just my opinion, BB

To: Vartan who wrote (21558)	7/11/1998 4:25:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

Vartan: re: "Where am I wrong?" You reached an estimate of 158M in profits when revenues are 850M, by assuming that margins would be the same as 3Q97: 186M/1B=19%, so 850M X 0.19=158M. This can't happen. This is a cyclical industry with zero visibility. Fixed costs are probably a higher % of total costs than in almost any other industry. The semi-equips have to guess what the semi industry will want several years in the future, and then spend a lot of money developing them. If industry conditions change, they can't reduce expenses at the same rate as revenues decline, because the money has already been spent or irretrievably committed. And if you do cut expenses, this will seriously hurt your ability to compete when the upturn does happen. Even though the semis aren't buying now, and have cancelled a lot of orders, when they change their minds, they'll want cutting-edge equipment, and they'll want it now. In particular, AMAT has spent more developing 300mm tools than anyone else. Read the posts from a year ago, and this R&D leadership was an important reason the stock reached 54. Today, all the semis have changed their mind about 300mm. AMAT has put 300mm from the front to the back burner, and now it's going back into the freezer. Cooking that meal cost a billion $, and now there is noone to serve it to. re: ""Oh, I know, I'll make 200% on it in the next three years". Too far." Actually, I'm much more comfortable making 3-5 year forecasts than 3-12 month forecasts. Long-term, barriers to entry are immense, this industry will never become commoditized, and most of the future growth of the US and global economy is going to flow from the kind of machines AMAT makes. I'm very comfortable predicting that, at the next cycle top, AMAT will make $5/share, and be at a P/S ratio over 4. I expect to make much more than a double. And I'm willing to tolerate the wild ride.