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

To: Justa Werkenstiff who wrote (27758)	1/16/1999 11:45:00 PM
From: Ian@SI	Read Replies (1) \| Respond to of 70976

Justa, There were a couple articles near the turn of the year re S.Korea ramping up again. One was from Merrill, I believe the other was SBN. Both were speculative rather than reporting hard information on firm orders. The Merrill speculation on 300mm could change the whole ball game. See Post by Tony Viola about 3 back from this one. If 300mm pilot lines start getting built, then this is a whole new ball game. And I'd be the first to buy AMAT even at $60+. ... unless you beat me to the punch. :-) Enjoy the rest of your weekend, Ian.

To: Justa Werkenstiff who wrote (27758)	1/19/1999 6:30:00 AM
From: Justa Werkenstiff	Read Replies (2) \| Respond to of 70976

Another view from Individual Investor: Semiconductor Rally: Too Far Too Fast Analyst: Will Frankenhoff In our last report two weeks ago, we questioned whether or not the underlying fundamentals of the semiconductor sector justified the 83% rise that the Philadelphia Semiconductor Index (SOX) had experienced from its low of October 8th. Since then, however, the SOX has risen an additional 12% while a group of bell-weather stocks: Intel (NASDAQ: INTC), Novellus Systems (NASDAQ: NVLS), Micron Technology (NYSE: MU), Texas Instruments (NYSE: TXN), Motorola (NYSE: MOT) and Lam Research (NASDAQ: LRCX), has moved even more rapidly, advancing an average 15.9% since Christmas. This means that shares of these high-profile companies have appreciated an average 108% since October 8th and now command (with the exception of Lam) an average forward P/E of 33. BancBoston Robertson Stephens analyst Sue Billat said "We can see signs of recovery -- orders are improving and the top U.S. chipmakers are expecting strong results." We agree with that point but we're not so sure that these results will extend past the current, seasonally strong fourth quarter, especially at current valuations. Irrational Exuberance? The handful of bell-weather stocks mentioned above have significantly outperformed all the major indexes over the period, beating the S&P 500 (up 32.3%), the Dow Jones Industrials (up 23.4%) and even the Nasdaq (up 63.9%). While the 33 P/E they now command is 13% lower than the historical 5-year average of 38, we believe that continued limited visibility into Q1 1999 and beyond make the recent run-up suspect in its exuberance. Take for example the fact that the Semiconductor Industry Association is projecting only 9.1% growth in revenue for 1999, 39% off the industry's historical growth rate of 15% and well below the golden days of 1993 to 1995 where the industry grew 30% to 40% annually transforming itself from a $60 billion business to one worth almost $150 billion. Applying this discount relative to the historical P/E would mean that the basket of stocks above would be fairly valued when sporting an average P/E of 25, a 24% reduction from current levels. Slowing Global Economy Furthermore, there is no escaping the fact that global economic growth is slowing going into 1999 and the fact that the big drivers of the 1993 to 1995 semiconductor renaissance -- PC unit growth and networking -- are growing much more slowly (13% to 15% vs. 25%, and 20% to 25% vs. 40%, respectively). The simple fact is that most people believe that any recovery in the industry will be moderate in 1999. Sean Maloney, Intel's vice-president of sales and marketing, said the "Consensus is that there will be a lot of sales in the first half of the year, and it will not be as strong in the second half." But as Terry Ragsdale, an analyst with J.P. Morgan Securities noted, It may not matter: It's the direction rather than the order of magnitude that investors are focused on. Bottom Line: We agree with Ragsdale's assessment but we think semiconductor stocks have moved too far, too fast, on too little news of importance.