Semiconductor Capital Equipment Stocks Discussion

Top 311. Jul 16, 2000 8:08 AM

» JenL_2 - In the Chips

This from 7/16 Barron's:

In the Chips

While semis swoon, other tech sectors boom

By Bill Alpert

When Jonathan Joseph called the top of this semiconductor cycle, the reaction was more hostile than he had expected. On July 5, the San Francisco-based analyst for Salomon Smith Barney warned that hard-to-find chips were becoming easier and cheaper to buy, while chip-making capacity continued to ramp. In six to nine months, Joseph said, the current chip boom might sputter.

Rival analysts grumbled that Joseph's sector call was grandstanding, a grasp for headlines. Yet for a couple of days, at least, the Solly analyst had tech investors thinking hard about the outlook for chip stocks -- one of this year's strongest tech sectors. Barron's thought it a good time to review the outlook for several important tech sectors......

..."I wanted to flag these issues early," Joseph said last week, "rather than being swept away by surprise, like most analysts were in 1995. That year, I was also early on calling declines."

What Joseph and his colleague Clark Westmont have seen this month is easing availability of flash memories and capacitors, two of the products that have been in shortest supply. Flash memory chips, made by the likes of Advanced Micro Devices and Silicon Storage Technology, go into many portable electronic devices, while capacitors are basic filters that go everywhere. Spot prices for capacitors have dropped to 65 cents from $1, Joseph said in his July 5 report, while a well-known chip broker reduced prices on eight-megabit flash memories to $13.50 from $14.50.

"Two weeks ago there were scattered reports of greater availability," said Joseph last week. "Today there are so many indications that flash availability is improving. And on capacitors, I've now got spot-market quotes in the 20-cent range. I don't think that's controversial anymore."

Along with such product-specific data, Joseph cites semiconductor industry data to argue that this year's capital spending will grow an impressive 60% over 1999. All that new capacity will overshoot demand, Joseph fears, eroding the premium prices for chips that have stoked the sector's boom.

Despite the sweeping sound of his warning, the Salomon analyst actually downgraded just four stocks: AMD, National Semiconductor, Silicon Storage Technology and Texas Instruments.

Although AMD should see continued strength in sales of its Athlon microprocessors, Joseph estimates that the Sunnyvale, California, firm has been getting 30% of its current-year revenues from flash memory. Indeed, a seller's market in flash memories has helped AMD shares triple this year, from a January level of $30.

Because Joseph figures that chip supply won't significantly overtake demand until next year, he's maintaining his AMD earnings estimates of $5.45 a share for this year and $5 for 2001. But he's pulling in his share-price target to 100 from 135, versus 87 1/2 late last week.

As a broad-based supplier of semiconductors, Texas Instruments would surely feel an industry slowdown, figures Joseph. What's more, the Dallas firm gets about 25% of its revenues from the wireless market, where rivals like Motorola and Qualcomm have seen feverish growth cool of late. Joseph therefore feels that TI's $70 share price is rich, given his EPS estimates of $1.25 for 2000 and $1.55 for 2001. So he's trimming his target price to 80 from 93.

But the chip industry is diverse enough for Joseph to have stocks he fancies. Demand for microprocessors and DRAM memory chips should comfortably exceed supply for the foreseeable future. He therefore likes Intel, the microprocessor giant, and Micron Technology, which has been raising prices on its DRAMs.

Joseph's fears for the semiconductor cycle aren't shared by Merrill Lynch analyst Joseph Osha. The spot prices for flash memory are poor indicators, says Osha, because the spot market represents so little of the chip market's volume. Osha is unflagging in his enthusiasm for flash makers like AMD and Atmel, and expects chip makers in general to report excellent results for their June and September quarters.

Analysts like Salomon's Joseph wouldn't be fretting about excess chipmaking capacity if this weren't a wonderful year for the industry's capital-equipment suppliers. Last week, in fact, Semicon-West was held, the largest trade show for that sector. Merrill analyst Brett Hodess reports that firms like Applied Materials and KLA-Tencor were upbeat about equipment orders for the rest of the year. Vendors reported strong orders from Japan, as well as for new technologies that can print chips on large 300-millimeter-diameter wafers or lay down wires of copper instead of aluminum. This good news led vendors at the show to raise forecasts for this year's growth to 75%, from earlier forecasts of 60%.

Achieving high production yields with these new generations of chip-making gear won't be a cinch. That will be good news for KLA-Tencor, whose products inspect wafers for bad circuits, says Merrill's Hodess. KLA shares had nearly doubled this year to a high of 98, before retracing to about 61. Hodess thinks they can reach 75.

In bygone days, most of the chip industry's output went into PCs. Now a growing hunk goes into the communications gear that runs the Internet and wireless networks. And Wall Street sees unbounded growth for firms that specialize in communications chips, such as PMC-Sierra and JDS Uniphase. Salomon's Clark Westmont still recommends purchase of PMC-Sierra, despite the stock's dandy year-to-date stock performance in which the Burnaby, British Columbia-based firm's shares nearly tripled to 216. That's 200 times Westmont's 2001 per-share earnings estimate of $1.62.

On Thursday, PMC-Sierra reported $134 million in revenues for the June quarter, a jump of 124% over the prior-year period. Not counting one-time factors, earnings were $39 million, or 23 cents a share, up 191% over the prior-year period. With a binge of product acquisitions turning PMC-Sierra into a one-stop networking chip shop, the Salomon analyst thinks the shares could reach 300.

On a similar acquisition romp is JDS Uniphase, the powerhouse in components for optical networking. "Optical is on fire," said analyst Michael Ching in a Merrill conference call last week. "Whatever a company can make, it can sell."

But after rising more than 50% this year to a high of 153, shares of JDS Uniphase tumbled last week from 116 to 96, on the Nepean, Ontario-firm's announcement of a $41 billion buyout of SDL. That price, based on JDS's share price before the announcement, made the deal the most expensive chip merger ever. By Friday the shares recovered to 110, and Merrill still favors JDS shares as a long-term holding. The broker expects the firm to report strong earnings on July 26.

Gobbling up networking chips as fast as PMS and JDS can make them are systems vendors like Cisco, Lucent Technologies and Nortel Networks. Nortel has been this year's favorite; a surge of new contracts and technology firsts lifted its shares to a recent 79 from 50. Merrill analysts say that the Brampton, Ontario, firm's bounty from optical networking and next-generation wireless infrastructure gear could enable Nortel to exceed forecast June-quarter sales growth of 25%, to $6.6 billion, and 27% earnings growth, to 14 cents a share.

Lucent, by contrast, should be lucky to meet Wall Street expectations, given this year's weakness in sales of traditional phone switches. Merrill analyst Michael Ching worries that he might have to reduce his estimates for Lucent earnings in 2000 and 2001.

At each end of the proliferating networks laid down by Nortel and Cisco are powerful server-computer and data-storage systems. So great is demand for Sun Microsystems servers that the Palo Alto firm has delayed new-product introductions.

The storage czars at EMC boldly expect accelerating revenue growth at their Hopkinton, Massachusetts, firm. Chief Executive Mike Ruettgers estimates that the company's addressable market will double next year, to $78 billion. Whenever movies and other "rich" (in terms of data) media finally make their way onto the Internet, says Ruettgers, storage demand will make an inflationary jump. An hour of motion pictures takes up four gigabytes (billions of bytes) of storage.

If Internet-style computing looks robust, a pall has fallen on mainframes and their software. Recent warnings of disappointing earnings from Unisys, Computer Associates and BMC Software have Wall Street fearful for IBM's June quarter.

For companies in the personal-computer business, analysts see a mixed outlook. While corporate demand has held up for the likes of Dell Computer, many investors are anxious about prospects for the consumer PCs sold by Compaq Computer, eMachines and Gateway. But Merrill analyst Steve Fortuna rallied to the defense of Gateway when its shares slid this past spring to 45 from 70. Even with the recovery to 66 levels last Monday, Fortuna told a conference-call audience: "This is a 'must own' stock at these levels."

When a listener asked Fortuna if Gateway might suffer from next year's arrival of cheap Internet-access appliances powered by new Intel chips, the Merrill analyst conceded that his Gateway recommendation extended only through yearend. By that time, back-to-school sales and expanded retail distribution would get Gateway shares back to the mid-70s or 80, where, said Fortuna, he'd become uneasy holding the stock.

After the Merrill call, however, Gateway shares shot up through Thursday, when the company announced June-quarter sales of $2.1 billion, a 12% rise, and earnings of $122 million, or 37 cents a share, a 37% rise over the year-ago quarter's $89 million, or 28 cents. The PC maker said it got 40% of its profits outside of PCs, and plans its own Internet appliance in October. The shares slipped Friday, to 66.

While last year's Internet darlings -- and even traditional leaders like Microsoft -- have had their comeuppances this year, some Internet software stocks have regained momentum. Chief among them is Ariba, a leader in business-to-business software. Through March, the Mountain View, California, firm's stock was a 10-bagger as it shot to 183 from 17. Peeling back to 50, amid Wall Street's reassessment of Internet stocks, Ariba's roared back -- for the best of reasons.

Wednesday Ariba said that June-quarter revenues from e-commerce software had rocketed 578% over the year-earlier quarter, and 322% over the March quarter. Ariba's June-period revenues from sales of its online-marketplace software and associated services totaled $81 million. Even though acquisition charges resulted in a June loss of $317 million, or $1.45, the firm's operating loss was $11 million, or five cents a share. According to First Call consensus estimates, that was better than Wall Street expected.

Charles Phillips, who follows such enterprise-software vendors for Morgan Stanley, had expected Ariba to report just $47 million in June revenues. Thursday he ratcheted his full-year revenue estimate above $240 million and his 2001 revenue estimate to $550 million, with Ariba perhaps breaking even in next year's fourth quarter. While aware of Ariba's rich valuatio, Phillips still sees upside for the shares as Ariba captures a surge of B2B spending. "Customers have big e-commerce budgets," says Phillips. "Everyone's trying to Internet-enable their business."

Subscribe to WSJ & Barron's Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2

Top 312. Jul 16, 2000 11:02 AM

» Slick - Thanks Jen...

A must read for investors in this " hot " sector. Appreciate you posting the article(s).

Slick

-- posted by Slick

http://biz.yahoo.com/bw/000717/ca_novell...

Top 313. Jul 17, 2000 2:41 PM

» Kirk - Novellus Systems Announces Record Orders, Revenues and Earnings

Novellus Systems Announces Record Orders, Revenues and Earnings for the Second Quarter

SAN JOSE, Calif.--(BUSINESS WIRE)--July 17, 2000--Novellus Systems Inc. (Nasdaq NM: NVLS - news) Monday reported record net sales and results of operations for its second quarter ended July 1, 2000.

Net sales for the quarter were $326.0 million, up 19 percent from $274.1 million in the first quarter of 2000 and up 149 percent from second quarter 1999 net sales of $130.9 million. Net income for the second quarter of 2000 was $75.7 million or $0.56 per share, up 32 percent from $57.5 million or $0.45 per share, for the first quarter of 2000 and up 510 percent as compared with net income posted in the second quarter of 1999 of $12.4 million and $0.10 per share. The per share amounts are stated on a fully diluted basis.

Record bookings for the quarter once again generated a book to bill ratio which was significantly above 1:1 for the quarter.

During the quarter, Novellus completed a public offering of just over nine million shares of its common stock, resulting in net proceeds to the company of $526.3 million. Internal cash generation in the quarter contributed an additional $95 million to the quarter end cash balance of $1.071 billion.

Richard Hill, chairman and chief executive officer said: ``This has been an eventful quarter for Novellus, with the addition of our company to the S&P 500, preparing for the launch of a new and revolutionary product, and another record quarter driven by robust capital spending by our customers for expanded capacity and advanced technology.''

Hill continued: ``Novellus' new product momentum continued with the recent unveiling of our complete suite of 300mm products at the Semicon West trade show. VECTOR(TM), a new 300mm plasma enhanced chemical vapor deposition (PECVD) system, is designed to deliver the full range of damascene dielectric films, and is extendable down to the 0.10 micron node, while reducing our customers' production costs. INOVA(TM) xT, a 300mm physical vapor deposition (PVD) machine, combines our proven hollow cathode magnetron (HCM(TM)) technology with a new innovative hardware design. At 100 wafers per hour, the INOVA(TM) xT delivers twice the throughput of any existing PVD system on the market. Significant enhancements to our Sabre xT electrofill system were announced as Novellus continues to develop innovative product features to strengthen its industry leading position. With these new products, Novellus is well positioned for the industry transition to copper dual damascene, 300mm wafers, and geometries down to the 0.10 micron node.''

-- posted by Kirk

http://www.semibiznews.com/story/OEG2000...

Top 314. Jul 18, 2000 8:57 AM

» Kirk - STMicro hikes capital spending to $3 billion, record Q2 orders

STMicro hikes capital spending to $3 billion, sees record orders in Q2

(07/18/00, 09:52:53 AM EDT)
GENEVA--STMicroelectronics today reported revenues grew 57.7% to $1.9 billion in the second quarter compared to $1.2 billion in the period last year. The European chip maker beat Wall Street's estimates for earnings with a net income of $336.5 million in the quarter, ended July 1, compared to $122.5 million in the period last year.

The company also announced it was upping its capital spending plans for 2000 to $3 billion, after spending $808 million on fabs and chip plants in the second quarter. At the start of 2000, STMicroelectronics had earmarked $2.2 billion for capital spending this year, up from $1.4 billion in 1999.

Sequentially, STMicroelectronics' second-quarter sales were 10.3% higher than $1.7 billion in the first three months of this year. "Revenue gains were achieved across all major product families and applications," said Pasquale Pistorio, president and CEO of the company. "The strongest sequential revenue improvements were posted by the consumer and telecom applications, which achieved sequential revenue increases of 21.9% and 12.3%, respectively, over first quarter levels." He said the company's standard, commodity, logic and memory product categories recorded sequential increases of 17.2% and 14.7%, respectively, from the first quarter 2000.

Improvements in filling wafer fabs with higher levels of capacity and higher prices for products drove earnings in the second quarter, added the CEO.

"We continue to experience record incoming order rates and backlog levels, indicating that the market recovery remains robust and that ST's technologically-advanced product portfolio is well suited for next generation applications," Pistorio declared. "Increasing order visibility leads us to expect that, despite traditional seasonal factors, third quarter revenues should show sequential improvement over second quarter levels. Additionally, we anticipate that the company's operating margin for the third quarter will be above the record level achieved in the second quarter of this year."

"In the second quarter, ST's capital investments were $808 million, bringing first half capital spending to over $1,430 million," he said. "We expect to spend over $3 billion in 2000, investing in additional capacity in order to take full advantage of growth opportunities within this period of strong market recovery."

-- posted by Kirk

Top 315. Jul 18, 2000 2:27 PM

» Rande - Teradyne (TER:

Teradyne (TER: news, msgs) reported a better-than-expected second-quarter profit late Tuesday, as year-over-year revenue almost doubled.

Teradyne shares fell 4.75 to 69.25 after closing down 5 to 74.

The automated test equipment and software provider said second-quarter earnings reached $137.6 million, or 76 cents per share, compared to $35.8 million, or 20 cents in the year-ago quarter.

Twenty analysts surveyed by First Call expected Teradyne to earn 74 cents per share on average.

Second-quarter revenue rose to $759 million from $401 million a year ago as orders for the quarter rose $255.4 million to $826.4 million

-- posted by Rande

Top 316. Jul 20, 2000 9:33 PM

» Kirk - JUNE 2000 BOOK-TO-BILL RATIO OF 1.26

Full Story with table of the data.

NORTH AMERICAN SEMICONDUCTOR EQUIPMENT INDUSTRY POSTS JUNE 2000 BOOK-TO-BILL RATIO OF 1.26

SAN JOSE, Calif., July 20, 2000 -- The North American-based manufacturers of semiconductor equipment posted another record month for shipments in June 2000 and a book-to-bill ratio of 1.26, it was reported by Semiconductor Equipment and Materials International (SEMI). A book-to-bill of 1.26 means $126 in orders were received for each $100 worth of products shipped.

The three-month average of worldwide shipments in June 2000 was $2.2 billion. The figure is three percent above the May 2000 level, and is 73 percent above the June 1999 shipments level of $1.3 billion. June shipments came in 36 percent above the previous cycle peak of $1.6 billion shipped in November 1997.

The three-month average of bookings in June 2000 was $2.8 billion. The bookings figure is one percent above May 2000 and 79 percent above the $1.6 billion posted in June 1999. June bookings came in 71 percent above the previous bookings cycle peak (also in November 1997) of $1.6 billion.

"While the pace is moderating, orders of semiconductor manufacturing equipment continued an upward trend in June," said Stanley Myers, president and CEO of SEMI. "Enthusiasm for a banner growth year was evident last week at the SEMICON West exposition, where the industry saw robust activity and strong sentiment for continued expansion in the chip industry."

The SEMI book-to-bill is a ratio of three-month moving average bookings to three-month moving average shipments for the North American semiconductor equipment industry. Shipments and bookings figures are in millions of U.S. dollars.

-- posted by Kirk

Top 317. Jul 21, 2000 7:52 AM

» Kirk - Gottfried's Latest Charts

From: Gottfried
Friday, Jul 21, 2000 12:19 AM ET

[edited] the charts have been updated with the latest SEMI orders/shipments/btb and prices.

I have no special insight. Remember that price moves before anything else.

ww semiconductor shipments vs SEMI orders
http://www.geocities.com/gottfried/SEMIs...

selected semi equipment stock prices vs SEMI orders
http://www.geocities.com/gottfried/amat_...
http://www.geocities.com/gottfried/klic_...
http://www.geocities.com/gottfried/klac_...
http://www.geocities.com/gottfried/cohu_...

SEMI orders/shipments/btb
http://www.geocities.com/gottfried/eqpor...

monthly ratio of SEMI orders to ww semiconductor shipments
http://www.geocities.com/gottfried/ratio...

monthly difference between SEMI orders and shipments
http://www.geocities.com/gottfried/SEMIb...

You can also go through Kirk's site for links.
http://pw2.netcom.com/~kirk_69/SemiLinks...

Gottfried

-- posted by Kirk

Top 318. Jul 21, 2000 9:06 AM

» Mark_J - CNBC

CNBC

CNBC just did a report and some analysts are saying that the end of the up cycle has started, and that a slowdown has already started.

They pointed out that there are alot of profits in these stocks the past 2 years, and many folks are a bit concerned.

Be very aware of the 4% rule, here. IMHO.

-- posted by Mark_J

Top 319. Jul 25, 2000 6:49 AM

» Kirk - Asyst Technologies: Riding the Chip Sector Boom

Here is a very cheap one ripe for a quick gain.
http://www.individualinvestor.com/tbd/ar...

Street Beaters: Asyst Technologies: Riding the Chip Sector Boom
Analyst: David Peltier (7/25/00)

Signs that the chip cycle is in the early stages of a two to three year boom have lifted the Philadelphia Semiconductor Index (SOX) to a 53% return year-to-date. The rally has extended far beyond the 16 index members, as momentum investors have been clamoring to own any company involved in the sector.
But not all stocks related to the chip industry are doing well this year.

Asyst Technologies (NASDAQ: ASYT - Quotes, News, Boards) saw its shares nearly double during the first three months of the year, only to lose all of the gains and more, dropping 57% from its high on March 27.

Asyst had the misfortune of being dragged down by the rip tide that sent almost all tech stocks into the drink. But when the chip sector started recovering over the last couple of months, its shares were overlooked. Investors were more than willing to get back into the large-cap chip names like Intel (NASDAQ: INTC - Quotes, News, Boards) and Texas Instruments (NYSE: TXN - Quotes, News, Boards) . But Asyst, given its market cap of under $900 million, was easy to overlook.

We think that's about to change.

At Monday's closing price of $27, the stock trades at only 14.3 times the $1.89 per share that the Street expects Asyst to earn in its March 2001 fiscal year. This looks especially cheap versus the 24% annual growth expected by Wall Street analysts over the long-term.

Last week, the company reported June fiscal first quarter earnings of $0.49 per share, a full dime ahead of estimates. This marks the fourth consecutive quarter that Asyst beat the Street.

The company makes automation products that facilitate the chip-making process. Asyst's Standard Mechanical InterFace (SMIF) units provide a safe and clean working environment for companies that manufacture 200mm (8") wafers.

Management says it has a market share of 80% to 90% in this industry, and it believes it will hold on to a lot of this business as the market moves towards 300mm wafers.

Asyst just introduced its FastTrack system for the 300mm products, and the company claims to have already received a lot of interest from potential customers.

Sales came in at $124 million, which was in-line with estimates and 32% sequentially better than the March quarter. This is the first quarter that Asyst topped $100 million in sales.

Other management goals include 50% annual revenue growth by the end of 2001. The company is already dominant in its market, and chief executive Mihir Parikh is confident that Asyst will continue to see its order sizes increase.

In a recent statement, Parikh noted that companies that used to buy $25 million in equipment are now making $40 million purchases, and he sees "$75 million orders ahead."

The earnings leverage was helped by a 380 basis point increase in the gross margin and lower research and development spending. This new leverage to the business model is seen as sustainable, and has led the Street to ratchet up their full-year EPS estimates.

Record bookings in the first quarter set the company up nicely for the near future, and should allow Asyst to post another double-digit sequential revenue gain. The company finished the June quarter with a book-to-bill ratio just above 1.1.

As for the semiconductor industry peak recently called by Salomon Smith Barney analyst Jonathan Joseph, Asyst continues to receive healthy business from customers in all global regions.

The company absolutely dominates in Asia, where it receives about 56% of its total sales. In fiscal 2000 the company's largest customer was Taiwan Semiconductor, and Asyst has strong ties with most of the Asian capital equipment makers.

The company's rock-solid balance sheet is anchored by $124 million, $3.50 per share, in cash and marketable securities, and it sports only $5.4 million in long-term debt. Both accounts receivable and inventory grew at a slower pace than sales, and the company fired off a secondary offering of stock last November to gain enough working capital for the near-term.

Bottom Line:

This stock has been oversold given its fundamentals. We believe Asyst will continue to benefit as the industry upgrades its equipment, and investors will likely prosper over the next year by investing at these levels.

I don't follow this one, but sounds worth a look. Anyone here follow it?

-- posted by Kirk