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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (4401)	4/10/1999 11:15:00 PM
From: Investor2	Respond to of 15132

Re: "Let's see....Dell insiders dumping, ..." They're not dumping, they're diversifying. <g> Best wishes, I2

To: Justa Werkenstiff who wrote (4401)	4/11/1999 8:54:00 AM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

* SSB on NVLS and AMAT and Copper ** AMAT; Impressive Copper Arsenal Introduced Salomon Smith Barney Friday, April 09, 1999 --SUMMARY:--Applied Materials--Semiconductor Equipment Expect copper electroplating to be a fierce battle with a 50/50 split between Applied and Novellus. AMAT displayed its entire copper arsenal in NY yesterday, consisting of Millennia ECP, Mirra Cu CMP, and Endura Barrier & Seed. Expect Millennia beta exit in 6 months and 10-15 shipments in 1999. Copper experience illustrates AMAT's ability to focus and ultimately deliver the right product. Key reason for our 1H stance. 50/50 split with Applied is not a negative for Novellus' shares. --EARNINGS:----------------------------------------------------------------- FYE 1 Qtr 2 Qtr 3 Qtr 4 Qtr Year Actual 10/98 EPS $0.52A $0.37A $0.17A $0.07A $1.14A Previous 10/99 EPS $0.11A $0.24E $0.28E $0.35E $0.98E Current 10/99 EPS $0.11A $0.24E $0.28E $0.35E $0.98E Previous 10/00 EPS $0.42E $0.46E $0.52E $0.63E $2.02E Current 10/00 EPS $0.42E $0.46E $0.52E $0.63E $2.02E Previous 10/01 EPS $N/A $N/A $N/A $N/A $N/A Current 10/01 EPS $N/A $N/A $N/A $N/A $N/A Footnotes: EPS are fully diluted. --FUNDAMENTALS:------------------------------------------------------------- Current Rank........:1-H Price 04/08/99......:$65.12 Prior Rank..........: Target Price........:$76.00 P/E 10/99...........:66.4X 52 Wk Price Range...:68.68 - 22.37 P/E 10/00...........:32.2X Proj. 5yr EPS Grth..:25.0% Return on Equity 98.:19.70% BookValue...........:$N/A LT Debt-to-Capital..:11.91% Dividend............:$N/A Revenue 1999........:$4850.00 mil Yield...............:N/A% Shares Outstanding..:378.00 mil Convertible.........:No Mkt. Capitalization.:$24615.36 mil Hedge Clause(s).....: Comments............: --OPINION:------------------------------------------------------------------ Copper Is An Emerging Market Copper interconnects provide advantages over aluminum such as: 40% lower resistance than aluminum which enables faster speeds and lower power consumption and better electromigration capabilities which leads to better reliability. Copper is a growing market and Applied expects an electroplating market size of $63 million (our estimate is $125 million) in 1999. How fast the market will grow in 2000 is still in question as 1999 is characterized by strong seeding demand and for the market to grow during 2000, one would need pilot line production. AMAT Launches Millennia Copper Electroplating Product Applied launched its long awaited Millennia copper electroplating product yesterday in New York. We were impressed with the technological features embodied in the product such as closed loop electrolyte control, separate wet and dry handling sections, and 3 dual cell modules for copper electroplating. The tool is based on the Producer robot architecture which has proven to provide high throughput in production and is 200/300mm compatible which provides customers with added flexibility. However, we suspect the competition can provide the same without much effort. The Millennia offers a high throughput of 70 wafers an hour, greater than 1% wafer to wafer repeatability, and less than 2% wafer in wafer uniformity. These specifications are very competitive with the other offerings in the market and, as a result, we expect it to be a fierce battle and hence our estimate for a 50/50 split between Applied and Novellus. AMAT Also Launches Complete Process Integration Solutions Along with the new electroplating product, Applied also highlighted its entire arsenal of copper products. This impressive display included the new Millennia copper electroplating product, Endura Barrier and Seed, and Mirra Cu CMP products. With a 90% plus market share in barrier/seed and 50-60% share in CMP, the electroplating product completes Applied's copper lineup. We believe the ability to provide a complete solution is a major advantage for Applied over its competitors given that it can potentially guarantee process integration and results. With all the integration issues involved with new technologies such as copper and low k dielectrics, Applied's EPIC center allows customers to experiment with different process configurations to ensure better results and is the only one of its kind. Gutsy Move To Ship Tool But Do Not Expect Major Setbacks Typically, equipment suppliers do not begin volume shipments to customers until they have exited beta testing. However, due to the fact that Novellus beat Applied to the market in introducing its electroplating tool, we believe that Applied has decided to go against conventional wisdom and ship its tool in volume quantities despite the fact that the tool will not exit beta for another 6 months. We expect shipments of 1-2 tools each month starting in April, which implies 10-15 unit shipments during 1999. Although this is a gutsy move, we do not expect any major setbacks. While it is inevitable that some issues will arise with a completely new tool, we have a high degree of confidence that Applied will be able to retrofit any tools in the field and quickly rectify any problems. The mainframe and the handler have been used on other Applied systems and hence we do not expect any major problems. More importantly, the Endura engineering team (which designed the bulletproof PVD system) is responsible for the project, which we believe is a major positive. Expect a 50/50 split with Novellus We expect a fierce battle in the copper electroplating market and believe Applied will ultimately capture a 50% share of the market in 1999. While Novellus was the first to market and is currently in the lead, there were several issues that prevented it from creating an impregnable position: 1) Novellus' tool did not offer closed loop control and hence was not completely ready, 2) the copper infrastructure (technologies such as CMP) was not entirely in place for semiconductor companies to ramp production, and 3) the lack of demand for semiconductors with copper metallization. This is resulting in a long gestation period between copper introduction and volume production, which has allowed Applied time to prepare its own offering. 50/50 Split Should Not Be Viewed As A Negative For Novellus Although Novellus is currently ahead in the copper electroplating race, a 50/50 split should not be construed as a negative for Novellus. While copper cannibalizes tungsten and aluminum deposition, a 50% market share position in copper is a positive for Novellus, who currently has a 35% market share in tungsten and a 6-8% market share in aluminum. Novellus is trading at a significant discount to Applied (3.6x calendar 2000 sales per share vs. 4.7x for Applied and 23x calendar 2000 EPS vs 29x for Applied) and our concerns about the copper ramp have already come to the surface. This Speaks To Applied's Execution Skills Applied has done a commendable job in getting its copper electroplating tool ready in a short period of time. Applied had previously denied the significance of copper but reevaluated its stance last year. We believe the introduction of its copper tool in a span of 8 months demonstrates the company's ability to compete despite being behind in the game. We reiterate our Buy (1H, High Risk) rating and price target of $76, or 5.5x our calendar 2000 sales per share of $13.8.