FOOL PLATE SPECIAL
An Investment Opinion
by Randy Befumo
Hit by a SEMI
The optimistic consensus that had projected demand for semiconductor capital equipment rising uninterrupted through the year 2000 hit a bump in the road yesterday. Semiconductor Equipment and Materials International (SEMI) reported yesterday that the North American semiconductor industry posted a book-to-bill ratio of 1.07 for the month of September. Although the book-to-bill ratio connotes that there were more bookings than billings, the book-to-bill results have been tumbling sequentially. SEMI revised August's book-to-bill down to 1.09, which itself is a drop from the 1.12 figure reported for July. Investors reacted by hosing semiconductor capital equipment manufacturers for the second day in a row today, taking shares of most of the major manufacturers down more than 5%.
Although the Semiconductor Industry Association (SIA) stopped publishing the often confusing book-to-bill number for the semiconductor industry last year, the semiconductor capital equipment industry's trade organization still publishes this indicator. The haphazard comparison of bookings to billings is used by many to gauge how strong demand is in the short term. If there are a $1.07 in bookings for every $1.00 in billings, this indicates that the absolute dollar amount of equipment ordered has increased versus what is being shipped. However, this does not specify unit volume and is a number that apparently only applies to North America. Given that Japan is the second-largest equipment market in the world and that it was East Asian demand that kept many semiconductor capital equipment manufacturers from losing money in 1996, this would seem that the book-to-bill number is curiously limited.
Looking at the press release, absolute bookings have increased by 5.4% per month. Taken on an annual basis, this means that revenues across the board are rising at an 89.8% annualized rate. Revenues in September versus August alone were up 6.2%, a 105.9% annualized rate that is clearly not sustainable. Share prices have doubled and tripled for most of these companies so far this year because of this strong performance, but much like in late 1995, it appears that the euphoria has gotten the better of many investors. The SEMI trade organization has stated a number of times that it sees "difficult" times for the business until the year 2000. Today's slump seems to be driven by previously unrealistic expectations being revised in the face of an almost inevitable slowdown in the pace of demand. APPLIED MATERIALS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> fell $2 7/8 to $41 3/8; KLA-TENCOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> was off $2 3/8 to $59 7/8; TERADYNE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TER)") else Response.Write("(NYSE: TER)") end if %> slumped $3 1/8 to $52 9/16; ASE TEST <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASTSF)") else Response.Write("(Nasdaq: ASTSF)") end if %> dropped $3 1/2 to $65 1/4; and other semiconductor equipment and equipment component manufacturers also were down on the news.
[PREVIOUS RELEVANT ARTICLE: The Evening News 08/12/97: Applied Theory]
OMNI INSURANCE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: OMGR)") else Response.Write("(Nasdaq: OMGR)") end if %> leapt $13 3/16 to $30 13/16 after HARTFORD FINANCIAL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HIG)") else Response.Write("(NYSE: HIG)") end if %> reported it would acquirer the non-standard auto insurer for $187 million in cash, or $31 3/4 per share.
APT SATELLITE HOLDINGS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ATS)") else Response.Write("(NYSE: ATS)") end if %> jumped $2 3/8 to $16 1/2 after China Aerospace took a 14.3% stake in the company, which controls APT Satellite, a China-backed satellite operator.
HELIX TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HELX)") else Response.Write("(Nasdaq: HELX)") end if %> popped $1 1/2 to $56 1/8 after the cryogenic pump manufacturer reported earnings of $0.60 per share, blowing through estimates of $0.54. The company is one of the few semiconductor capital equipment-related issues to be up today.
In more acquisition news, INFINITY FINANCIAL SERVICES <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INFN)") else Response.Write("(Nasdaq: INFN)") end if %> jumped $2 1/4 to $16 after the company was acquired by SUNGARD DATA SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDS)") else Response.Write("(NYSE: SDS)") end if %> in a stock-swap valued at $313 million before the market opened today. The acquisition will allegedly enhance Sungard's "best-of-breed" derivatives and risk management product suite.
SIEBEL SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEBL)") else Response.Write("(Nasdaq: SEBL)") end if %> rose $2 5/8 to $45 7/8 after the company reported earning $0.14 per share in the third quarter, four cents higher than consensus estimates. The company develops and markets sales force automation (SFA), call center, and helpdesk software products.
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %> dropped $5 1/16 to $37 1/4 after the network systems developer missed the first quarter consensus earnings estimate of $0.44 per share last evening. The Palo Alto, California-based company earned $0.41 per share, up 28% from year-ago levels, and blamed foreign currency translations and some weakness in the last month of the quarter for the disappointing results.
Computer disk drive manufacturer SEAGATE TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SEG)") else Response.Write("(NYSE: SEG)") end if %> imploded $4 9/16 to $32 3/4 after the company reported very disappointing first quarter results. Seagate reported a 4% sequential decline in revenues and only earned $0.08 per share in the quarter, well below estimates of $0.37.
Millimeter wave radio manufacturer P-COM INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCMS)") else Response.Write("(Nasdaq: PCMS)") end if %> fell $7 3/8 to $20 5/8 on reporting a 91% gain in Q3 revenues and EPS of $0.12, double last year's result and in line with the First Call mean estimate. Both UBS Securities and Prudential cut their ratings on the company to "hold" from "buy" based on valuation.
TELCOM SEMICONDUCTOR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: TLCM)") else Response.Write("(Nasdaq: TLCM)") end if %> fell $1 7/8 to $11 5/8 after reporting record Q3 EPS of $0.12, in line with estimates. The company added, however, that it sees flat sequential sales growth and that it's seeing volatility in ordering patterns from its largest OEM customers.
AVIS RENT A CAR <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVI)") else Response.Write("(NYSE: AVI)") end if %> dropped $2 3/16 to $25 after the car rental company said that it was under investigation by the Justice Department for discriminating against minority customers.
Telecom switch manufacturer SUMA FOUR <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUMA)") else Response.Write("(Nasdaq: SUMA)") end if %> lost $2 to $11 3/8 on turning in flat year-over-year Q2 revenues of $10.1 million. The company achieved a 9% sequential increase in revenues, though, and reported a loss of $0.09 per share (before charges), which met estimates.
Wide area network access products company VERILINK <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VRLK)") else Response.Write("(Nasdaq: VRLK)") end if %> slid $1 1/8 to $7 3/8 after reporting a 32% decrease in Q1 revenues of $10 million and a loss of $0.05 per share, the company's first loss since 1993.
Field programmable gate array manufacturer XILINX <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: XLNX)") else Response.Write("(Nasdaq: XLNX)") end if %> fell $1 5/8 to $38 3/4 on reporting Q2 EPS of $0.38, just below the mean estimate of $0.39. Sequentially, sales fell 7% due to pronounced weakness in European orders. This weakness may also explain a drop in the shares of competitor ALTERA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ALTR)") else Response.Write("(Nasdaq: ALTR)") end if %>, which declined $4 1/8 to $48 9/16.
IRIDIUM WORLD COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IRIDF)") else Response.Write("(Nasdaq: IRIDF)") end if %> descended $3 to $43 1/4 even though the prospective provider of satellite telephony said it hit all of its development goals in the quarter. Merrill Lynch yesterday cut its long-term rating on the company to "accumulate" from "buy" in advance of the quarterly progress report.
VISX INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: VISX)") else Response.Write("(Nasdaq: VISX)") end if %>
(402) 220-4836 -- replay
SYBASE <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SYBS)") else Response.Write("(Nasdaq: SYBS)") end if %>
(402) 220-0111 -- replay
SUMMIT PROPERTIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SMT)") else Response.Write("(NYSE: SMT)") end if %>
(800) 633-8284 (code: 3148971) -- replay through 10/17 @ 5:00 pm EDT
FREDDIE MAC <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FRE)") else Response.Write("(NYSE: FRE)") end if %>
(800) 475-6701 (code: 358103) -- replay through 10/17
INTEL CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INTC)") else Response.Write("(Nasdaq: INTC)") end if %>
(402) 220-0103 -- replay through 10/17
ECHLIN, INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ECH)") else Response.Write("(NYSE: ECH)") end if %>
(800) 683-1535 (code: refocus) -- replay through 10/17
ASCEND COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ASND)") else Response.Write("(Nasdaq: ASND)") end if %>
(800) 475-6701 (code: 358559) -- replay through 10/17
CCA PRISON REALTY TRUST <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PZN)") else Response.Write("(NYSE: PZN)") end if %>
(402) 220-8775 -- replay through 10/17
USANA <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: USNA)") else Response.Write("(Nasdaq: USNA)") end if %>
(303) 804-1855 (code: 243759) -- replay through 10/18 @ 4:30 pm EDT
SUN MICROSYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SUNW)") else Response.Write("(Nasdaq: SUNW)") end if %>
(800) 633-8284 (reservation # 3086520) -- replay through 10/19
(303) 248-1201 (reservation # 3086520) -- replay for international callers
IOMEGA CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %>
(800) 446-4927 -- replay through 10/20
CREE RESEARCH <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CREE)") else Response.Write("(Nasdaq: CREE)") end if %>
(800) 633-8284 (code: 3256078) -- replay through 10/21
PLATINUM TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PLAT)") else Response.Write("(Nasdaq: PLAT)") end if %>
(800) 642-1687 (code: 635624) -- replay through 10/21
DOCUMENTUM <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DCTM)") else Response.Write("(Nasdaq: DCTM)") end if %>
(402) 344-1087 -- replay through 10/21
360 COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %>
(402) 220-3014 -- replay until 10/22
AVALON PROPERTIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AVN)") else Response.Write("(NYSE: AVN)") end if %>
(800) 475-6701 (code: 359042) -- replay through 10/22
(320) 365-3844 (code: 359042) -- replay number for international callers
INTERMET INC. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INMT)") else Response.Write("(Nasdaq: INMT)") end if %>
(800) 475-6701 (code: 360026) -- replay through 10/23
(320) 365-3844 (code: 360026) -- replay for international callers
TRIBUNE COMPANY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TRB)") else Response.Write("(NYSE: TRB)") end if %>
1-800-633-8284 (code: 3218583) -- replay through 10/24
10/20/97 (Monday)
MICROSOFT CORPORATION <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>
(800) 456-5304 (code: 1017) -- replay through 10/22
10/21/97 (Tuesday)
TIDEWATER <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TDW)") else Response.Write("(NYSE: TDW)") end if %>
(800) 475-6701 (#358977) -- replay through 10/22 @ 11:00 am EDT
THIS WEEK'S CONFERENCE CALL SYNOPSES
GREEN TREE FINANCIAL <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: GNT)") else Response.Write("(NYSE: GNT)") end if %> Call
FOOL PORTFOLIO BORING PORTFOLIO AMZN down $1/4 at $43 1/4 ATLS down $9/16 at $26 13/16 AOL down $1/8 at $84 3/8 BGP down $1 1/4 at $25 1/8 CHV down $7/16 at $85 9/16 CSCO dn $1 1/4 at $80 7/16 COMS down $1 1/16 at $50 CSL up $1/4 at $46 DJT down $1/16 at $10 GNT down $7/16 at $48 9/16 GM down $1 3/8 at $68 5/8 ORCL dn $11/16 at $33 3/4 INVX down $1 at $28 1/2 OXHP down $3/8 at $72 IOM up $1 3/4 at $26 1/2 PMSI down $1/16 at $14 KLAC dn $2 1/8 at $60 1/8 TDW down $15/16 at $63 LU dn $2 7/16 at $85 9/16 MMM down $7/16 at $95 1/8 T up $1 1/4 at $44 13/16WE DELIVER - Get The Lunchtime News delivered
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Randy Befumo (TMF Templr), Fool One
Dale Wettlaufer (TMF Ralegh), Fool Two
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