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

To: Herschel Rubin who wrote (6311)	7/17/1998 2:16:00 PM
From: Gottfried	Read Replies (1) \| Respond to of 10921

Ramsey, you said >companies become leaner after trimming out "dead wood"...< Some of them are trimming healthy twigs now. GM

To: Herschel Rubin who wrote (6311)	7/17/1998 5:38:00 PM
From: Ramsey Su	Respond to of 10921

Herschel, It is nice of you to dig up what I said a couple of years ago. Cary (the father of this thread who has since disappeared) and I had a debate over when the group will recover. I opined that he was early. As it turned out, he was correct. There are a couple of major differences between now and then. First and foremost is capacity. I don't remember so much excess capacity back in 1996. Secondly, Korea, Taiwan and even Japan were not in similar dire condition as now. The signal here would be M&As or other creative ventures such as TXN and MU, only it will involve healthy US or European companies and ailing Korean or Japanese fabs. Finally, go back and look at some of Cary's analysis, using stuff like PS, book value etc., stocks like AMAT is higher now than the bottom reached in 1996. One can argue that we are already enroute to recover, but we may not have hit bottom yet. Place your bets. Ramsey

To: Herschel Rubin who wrote (6311)	7/20/1998 8:54:00 AM
From: Q.	Read Replies (4) \| Respond to of 10921

Herschel, to test your analogy to August 1996, which along with July 1996 was the bottom for AMAT and semiconductor stocks too, I looked up the monthly issues of Infrastructure for 7/96 and 8/96. Here's what Carl Johnson had to say: July 1996: We think we will see a massive painful downsizing of many payrolls over the next few months. Just for starters, several large ... players have enacted hiring and spending freezes to compensate for the slowing business conditions. August 1996: Investors are pruning technology stock holdings because this downturn does not look as if it will end in the next few quarters and earnings, at least on an intermediate basis, will drop like a lead balloon. This case is quite simple to argue for much of the semiconductor sector. Why will earnings drop? We could go into the obvious culprits like the long life of the 4MB DRAM, the massive deployment of capital to new manufacturing facilities and the inventory buildup of the last year ... ----------------------------------------------- Herschel, I think you are correct in identifying the present moment as being similar to August 1996 regarding what people are feeling and saying about the outlook. On the other hand, Ramsey is correct that not everything is the same this time. But maybe this doesn't matter. Probably the fundamental causes of the revenue decline will be different in every downturn, so maybe this isn't as significant as the indicators that are more generic: layoffs and lack of earnings visibility. Re. the stock prices, Ramsey is certainly correct that the price multiples of AMAT in particular have not fallen this summer to levels in 1996. Smaller players, though, have seen price multiples drop even below the levels of 1996. I'm not sure why AMAT's multiples are different. Maybe it's that the co. is so big that it has more shareholders, and they are less aware of a semi equip industry than they are of the semiconductor industry. So they think of AMAT as more of a semiconductor stock than a semi equip. I know that some people at least think that way. Anyway, AMAT's share price does follow the semicondcutor index SOX very closely: over 6 mos: tscn.com and over 3 years: tscn.com