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

To: MR who wrote (21581)	7/11/1998 5:07:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

To: all the new blood/trial members: you're a breath of fresh air, and I appreciate the various insights. Could you do a couple of things: 1. help me compose a list, titled "Noise", of all the bad sources of info about this industry. Let's start with everyone who, from mid-May till yesterday, put AMAT on their Best-Of-Breed/Select/Core Investment/Wild-About-It list. 2. comments/criticism/additions/subtractions on: BOTTOM INDICATORS for semi-equips:(posted 6/10/98) 1. semi companies, particularly in commodity markets (DRAM) regain PRICING POWER. Semi profits (notice I said profits not sales or units sold) have to be up. Semi inventories fall. Micron's ASP rebounds. Before this can happen, enough fabs have to be shut down to relieve the overcapacity. Further equipment upgrades and die-shrinks during a period of overcapacity only prolong the torture. Several major players have to abandon the field. 2. CAPITULATION:The 5 stages of despair are: A. "these stocks will go up forever; I'm fully margined;my clients demand these in the portfolio/mutual fund I manage" (Feb. to Oct. 1997) B. "these stocks will go up again soon" (Oct. 1997 to mid- May 1998) C. "these stocks are a good value" (last three weeks till ?) D. "this industry is too cyclical and I'm out; I just had a margin call; my clients/boss will shoot me if I keep these in the portfolio/mutual fund" (aren't there yet) E. capitulation 3. CONSOLIDATION:semi-equip equity prices reach a low enough point that the strong and big decide they can get bigger by buying (rather than growing internally), and start eating the small and weak. For instance, in the last downturn, at the bottom AMAT used some of its mountain of cash to buy two minnows and invade KLAC's turf. KLAC responded by merging with Tencor. Hasn't started yet this downturn. 4. the last ANALYST downgrades. Excellent contrary indicator. 5. semi-equip BTB doesn't decline for 3 consecutive months. The BTB has enough noise in the signal that a single flat month-to-month isn't enough to bet on. 6. PRICE/SALES RATIO is at the lower end of the historical range. For AMAT, fair value (where the stock stays most of the time) is in a P/S ratio of 2-3.5 (this corresponds to a stock price of 26-45). Notice that the lower end of that range corresponds nicely with the 12/97 and 1/98 lows, which we almost reached again recently. The only semi-equip there yet is KLAC. 7. SEMI STOCKS trending up. In 1996, INTC bottomed in January, then steadily moved up, and AMAT bottomed 5-6 months later. This makes sense, since prospects for semis have to improve before they place big orders. I guarantee you that as long as INTC is hitting 52-week lows the equips will do poorly. How can you do well when your customers aren't? 8. let the MARKET tell you. Once we're in undervalued range (for AMAT, below 26), wait till we form a double bottom. These stocks will need to form a base, lasting a couple of months at least, so you can wait and get a bit of reassurance that what you're catching isn't a falling knife. 9. none of the above will tell you where or when the bottom will be, so BUY IN INCREMENTS, and make sure you won't have a margin call when the stock drops (another) 50% after you bought it.

To: MR who wrote (21581)	7/11/1998 5:45:00 PM
From: Henry Eichorszt	Respond to of 70976

Top Stories: Surprise! Applied Materials Preannounces By Eric Moskowitz Staff Reporter 7/10/98 6:19 PM ET As TSC predicted yesterday, semiconductor equipment leader Applied Materials (AMAT:Nasdaq) said it won't meet earnings estimates when it reports third-quarter results Aug. 11. Analysts had estimated Applied Materials would earn 21 cents a share in its July quarter, but now the company is saying it will earn more like 15 cents to 18 cents per share. Applied Materials, which earned 39 cents per share in its year-ago July quarter, cited delayed Asian orders, overcapacity in the dynamic random-access memory-chip market and low-priced PCs as the culprits. Most significantly, new orders, or bookings -- a key indicator for the semi equipment space -- in the third and fourth quarters are expected to be significantly lower than the second quarter's $1.03 billion. Steve Wing, an analyst with the Colorado-based money management firm American Frontier Financial, says that after talking with one of Applied's biggest customers -- Helix Technology and its financial chief, Michael El-Hillow -- things might not get better for Applied Materials for a while. El-Hillow "thinks things for AMAT won't be getting better until the second half of 1999," says Wing. "The equipment companies still are having excess inventory problems from building up all that manufacturing capacity in 1994 and 1995." Still, he adds, there is such value at the Santa Clara, Calif., chip-equipment maker that his firm is buying the stock on this bad news. "We think on an 18-month price horizon this stock can double or even triple from these levels," says Wing, whose firm has a long position on the stock, which rose 1/2 to close at 29 1/2 Friday. So it seems if an investor is willing to wait until early 1999 for a spike in this stock, Applied could be a real winner. Of course, analysts and money managers alike have been saying the company is "about to turn the corner" for some time now. See Also TOP STORIES Not So Chipper 7/2/98 10 AM SILICON VALLEY Yahoo! Yippee? 7/8/98 4 PM TOP STORIES Semiconductor Equipment Makers Still Have a Tough Road Ahead 2/19/98 3 PM TOP STORIES ARCHIVE VIEW CHARTS AMAT ÿÿc 1998 TheStreet.com, All Rights Reserved.TOPÿÿ\|ÿÿABOUTÿUSÿÿ\|ÿÿ CONTENTSÿÿ\|ÿÿSUBSCRIBEÿÿ\|ÿÿADVERTISEÿÿ\|ÿÿTRADEÿONLINEÿÿ\|ÿÿFEEDBACK

To: MR who wrote (21581)	7/11/1998 7:52:00 PM
From: P.M.Freedman	Read Replies (1) \| Respond to of 70976

>>I think AMAT will take at least a couple months to bottom out.<< I am not sure on the time frame of the bottom. The time to bottom out is the time that Asia flu cures. Did AMAT mentioned next quarter in last Friday's warning? With the fact that Intel is shutting plants for 10 days to reduce inventories, other semis should be facing the same inventory problems. AMAT may have additional bad quarters (one or two). I used to be at the long's side for AMAT but this time I may initiate a short position above $23 if I can get it on Monday. Good luck!