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Tuesday, May 13, 2008

Applied Materials (AMAT) guides lower

Orders at the low end, expect orders down 15-25% for next quarter, see revenue down 10-18% for next quarter, see DRAM down 50% this year. EPS 10-14 cents for next quarter. DRAM is the kryptonite in the solar-powered Superman story of Applied Materials right now. They're talking about this being the bottom but they pushed recovery off the calendar from its previous position of second half of this year. The stock has been treading water for months, torn between optimism about their solar business and fears about the semiconductor part of the business. Semiconductors are the vast majority of business. Solar represents a fractional portion of business at less than 10%.

Investors trade these stocks with a 6-12 month horizon. Theoretically the stock is a buy on that basis as business sucks now and could be better in 9 months and as the semiconductor business shrinks, solar becomes more of the mix. They need to shrink for solar to become more of the valuation. Irony, my friends.

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