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FOOL PLATE SPECIAL
An Investment Opinion
by Dale Wettlaufer
For Every Sector, Turn, Turn
<% ' AvantGo:FoolPlate %>Semiconductor yield management company KLA-Tencor <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLAC)") else Response.Write("(Nasdaq: KLAC)") end if %> was downgraded to "neutral" from "outperform" this morning by Morgan Stanley Dean Witter, easing the stock down $1 5/16 to $35 9/16. Also receiving the same downgrade from MSDW were a number of other firms in the semiconductor capital equipment industry, including wafer stepper company ASM Lithography <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ASMLF)") else Response.Write("(NYSE: ASMLF)") end if %>, down $13/16 to $24 11/16; DuPont Photomasks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: DPMI)") else Response.Write("(Nasdaq: DPMI)") end if %>, down $2 1/4 to $34; and etch and chemical mechanical planarization equipment company LAM Research <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LRCX)") else Response.Write("(Nasdaq: LRCX)") end if %>, off $5/16 to $14 1/8. Wafer stepper company Ultratech Stepper <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: UTEK)") else Response.Write("(Nasdaq: UTEK)") end if %> was also downgraded, but ticked up $5/8 to $18 5/8 at midday.
These downgrades come shortly after the sector saw a nice boost from anecdotal evidence of some of the gloom lifting in the outlook for the group. In its recent conference call, the CEO of power supply manufacturer Advanced Energy Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AEIS)") else Response.Write("(Nasdaq: AEIS)") end if %> said that the company was seeing better activity for the fourth quarter, which sent that company's stock from near $7 to its present level above $12. That being some of the first positive guidance the sector had seen in a while, a number of stocks took wing on the comments and a change in sentiment has been seen since. Objectively, there aren't a lot of data points to cling to, but a number of way points should be considered.
The recent semiconductor equipment book-to-bill ratio reached a historic low of 0.57 (the data has been tracked since 1991, not a vintage year), with the front-end book-to-bill reaching 0.55, a very low number indicating that for every $1 in billings for the front-end equipment companies, they are taking in only $0.55 in new bookings. Interestingly, advancements in semiconductor feature sizes aren't helping the front-end companies, as fewer machines per device are needed when you can fit more devices on a single wafer. On the flipside, the yield management firms like KLA-Tencor and back-end companies like Teradyne <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TER)") else Response.Write("(NYSE: TER)") end if %> should benefit from increasing output.
Traditionally, back-end companies have seen recoveries in advance of the front-end companies, as increases in capacity are first seen on the test and assembly end of things, rather than in processing. To that end, the back-end book-to-bill ratio recently rose to 0.60 in September from 0.53 in August. Teradyne has responded to that, but leading assembly equipment company Kulicke & Soffa <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: KLIC)") else Response.Write("(Nasdaq: KLIC)") end if %> has been somewhat sluggish. Value investors have been patient with this sector for a while, as many of these companies are cash-rich and still serve an end-market with good volume growth dynamics. Whether the group is really turning or not is hard to tell, but the Applied Materials <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMAT)") else Response.Write("(Nasdaq: AMAT)") end if %> conference call this month will be the next checkpoint for the sector.<% ' AvantGo:End %>
<% ' AvantGo:Ups %>Business systems management software firm Boole & Babbage <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BOOL)") else Response.Write("(Nasdaq: BOOL)") end if %> gained $3 7/16 to $30 1/16 after agreeing to be acquired by enterprise application software developer BMC Software <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BMCS)") else Response.Write("(Nasdaq: BMCS)") end if %> in a stock swap valued at about $900 million. The deal values Boole & Babbage at about $32.44 per share, based on BMC's closing price of $48 1/16 per share on Friday. BMC fell $2 1/4 to $45 13/16 on the news.
Dutch consumer electronics manufacturing giant Philips Electronics NV <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PHG)") else Response.Write("(NYSE: PHG)") end if %> added $3 3/4 to $59 after the company said it will close 36 to 46 manufacturing plants worldwide over the next four years in an effort to cut costs. Philips said it plans to have 226 plants by the end of this calendar year but hopes to operate only 160 to 170 in 2002.
Oil and gas drilling products and services firm Smith International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SII)") else Response.Write("(NYSE: SII)") end if %> spouted up $3 to $38 15/16 after an article in Barron's suggested the company may be a takeover target. Rival Schlumberger <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SLB)") else Response.Write("(NYSE: SLB)") end if %>, which was singled out as a possible buyer, rose $2 3/8 to $54 7/8.
Help desk software maker Remedy Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: RMDY)") else Response.Write("(Nasdaq: RMDY)") end if %> moved up $1 5/8 to $10 3/8 after winning a contract from telecommunications equipment maker Lucent Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LU)") else Response.Write("(NYSE: LU)") end if %> to design a worldwide customer support system for Lucent's network products.
Macromedia <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MACR)") else Response.Write("(Nasdaq: MACR)") end if %> advanced $2 7/16 to $22 7/16 after Adams, Harkness & Hill started coverage of the Web publishing and design tools company with an "attractive" rating.
Spine-related surgical products and systems maker Sofamor Danek Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SDG)") else Response.Write("(NYSE: SDG)") end if %> tacked on $10 1/8 to $111 3/4 after pacemaker and related implants designer Medtronic <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MDT)") else Response.Write("(NYSE: MDT)") end if %> agreed to acquire the company in an estimated $3.6 billion stock swap. Each Sofamor Danek share will be converted into $115 in Medtronic stock, which works out to a 13% premium to Sofamor Danek's closing price of $101 5/8 per share on Friday.
International Manufacturing Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMSX)") else Response.Write("(Nasdaq: IMSX)") end if %>, which provides backplane and box-build assembly services, rose $1 5/8 to $6 3/4 after agreeing to be acquired by computer and communications design and manufacturing services firm Celestica Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CLS)") else Response.Write("(NYSE: CLS)") end if %> in a deal valued at $160 million. Each IMS share can be converted into either 0.4 Celestica subordinate voting shares or $7 per share in cash.
Telecommunications network capacity company Ciena Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %> picked up $3 15/16 to $21 1/8 on speculation that the firm will soon announce that it has signed a new supply contract with a telecommunications carrier.
Orbotech Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ORBKF)") else Response.Write("(Nasdaq: ORBKF)") end if %>, which designs printed circuit board automated optical inspection and computer aided manufacturing equipment, spun ahead $2 5/16 to $37 5/16 after reporting Q3 EPS of $0.75 versus $0.70 a year ago, beating the Street's mean estimate of $0.71. The company said sales of its printed circuit board equipment rose 23% compared to the same period a year ago.
Magnetic resonance imaging (MRI) products maker Advanced Magnetics <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: AVM)") else Response.Write("(AMEX: AVM)") end if %> jumped $3 7/8 to $10 3/8 after an analyst told Barron's the company's stock may be undervalued.<% ' AvantGo:End %>
<% ' AvantGo:Downs %>Banking giant Citigroup <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %> withdrew $1 7/8 to $45 1/8 after Jamie Dimon, its president and chairman and co-CEO of Salomon Smith Barney, announced his resignation. In a surprise reshuffling in its leadership, Citigroup said it will integrate Citibank's corporate banking business with Salomon Smith Barney. Dimon had been considered the heir apparent to the leadership of the financial services giant formed by the merger of Citibank and Travelers Group.
Real estate investment trust Tower Realty Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: TOW)") else Response.Write("(NYSE: TOW)") end if %> toppled $3 to $17 1/4 after it said Crescent Real Estate Equities Co. and Reckson Associates Realty Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RA)") else Response.Write("(NYSE: RA)") end if %> have backed out of their planned merger with Tower Realty. The office building owner previously announced it had agreed to be acquired by a joint venture of Crescent and Reckson for $24 a share in cash. Tower says it's suing the companies in New York State Supreme Court for damages of at least $75 million.
ABR Information Services <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ABRX)") else Response.Write("(Nasdaq: ABRX)") end if %>, which provides benefits administration, payroll, and human resource outsourcing services to employers, retreated $11/16 to $18 3/16 after it said late Friday it will put off filing its 10-K as it continues talks with the SEC regarding how the company can account for its April 30 acquisition of Business Computer Services Inc.
Plumbing, electrical, and hardware products distributor Barnett Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BNTT)") else Response.Write("(Nasdaq: BNTT)") end if %> dripped down $1 1/2 to $12 1/2 after it said fiscal Q1 EPS was $0.21, just ahead of last year's $0.20 figure but a penny off analysts' projections. CEO William Pray reported "slower than anticipated" growth in the company's core business as Barnett released the fewest number of new products of any of the last eight quarters.
Railroad signal and control products manufacturer Harmon Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HRMN)") else Response.Write("(Nasdaq: HRMN)") end if %> rattled down $1 1/16 to $24 5/16 after late Friday's announcement that Q3 EPS will fall below Wall Street's $0.30 estimate when the company reports earnings tomorrow evening. CEO Bjorn Olsson called the shortfall an issue of "timing," saying that products were shipped early at customers' requests and recorded in the second quarter. The company still expects to meet expectations for the year, which now stand at $1.32 a share.
Investors hung up on call center software developer Information Management Associates <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: IMAA)") else Response.Write("(Nasdaq: IMAA)") end if %>, which dropped $7/16 to $5 1/8 after late Friday reporting Q3 EPS of $0.13, excluding unusual charges, short of analysts' mean estimate of $0.16. The company also restated Q2 EPS to better meet SEC guidelines, with a new figure of $0.06, half of the originally reported number.
Bedford Property Investors <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BED)") else Response.Write("(NYSE: BED)") end if %> dropped $1 1/2 to $16 3/8 after the real estate investment trust announced it has ended previously announced talks to sell substantially all of the company's portfolio of suburban office buildings and industrial properties to a third party.<% ' AvantGo:End %>
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Contributing Writers Yi-Hsin Chang (TMF Puck), a Fool Brian Graney (TMF Panic), another Fool David Marino-Nachison (TMF Braden), a new Fool
Editing |