Transcript Slide 1

Semiconductors
Manraj Aujla
Winky Cheung Shane Johnston Puneesh Lamba
Insoo Park
Agenda
• Industry Overview
– Technology
– Market
• Intel
• AMD
• Applied Materials
What is a Semiconductor?
• Materials which have a conductivity between
conductors (general metals) and nonconductors or
insulators (such as ceramics)
• Semiconductors can be:
– pure elements, such as silicon or geranium
– Compounds such as gallium arsenide or cadmium selenide
• Doping
– A process in which small amounts of
impurities are added to pure conductors
– Causes large changes in the conductivity
Silicon is the most popular material for semiconductors
How is a Semiconductor Made?
Where are Semiconductors Used?
Brief Timeline of
Semiconductor Development
• 1950’s to 1960’s
– Mainly used for military and
aerospace operations
– U.S. Air Force incorporates
semiconductors in Minutemen
Missile design
– The Pentagon and NASA quickly
become two of the industry’s
major customers.
– The Semiconductor industry
reaches 100 million in sales
AUTOMATIC TESTING SYSTEM FOR MINUTEMAN MISSILE
Brief Timeline of
Semiconductor Development
• 1970’s
– Semiconductor industry
becomes more focused on
PC market
• In 1970:
– Intel invents SRAM and
EPROM and introduces
microprocessors
– Enables the "brains" of a
computer to be on one chip
for the first time.
• 1975
– the first personal computer
goes on market
1975 IBM 5100 Personal Computer
Price: $8975 to $19,975 depending
on memory (16K, 32K, 48K or 64K)
Brief Timeline of
Semiconductor Development
• 1980’s
– The semiconductor industry surpasses $10
billion in sales
– IBM enters the PC business with a line of
desktop PCs
• later to become the single largest use for
microprocessors
– Motorola introduces first pager to incorporate a
microprocessor
• longer battery life and the ability to have more pagers on
a network.
– Hewlett-Packard introduces the first scientific
pocket calculator.
• sent slide rule manufacturers out of business.
– Motorola’s first cellular phone comes to market.
Motorola Dynatac
CIRCA 1973
Brief Timeline of
Semiconductor Development
• 1990’s
– Sales in the PC market grow
dramatically, semiconductor
industry surpasses $100 billion
sales by 1995.
– U.S. chip companies command
more than 50 percent of the
global market.
– Sales shift the demand from PCs
to communications products.
Brief Timeline of
Semiconductor Development
• 2000
– Worldwide semiconductor
sales exceed $200 billion
for the first time in history.
Growth of Computation/Second
over Time
Source: IBM
Structure of Semiconductor Market
• By product
Structure of Semiconductor Market
• By business model
–
–
–
–
–
–
–
Fully Vertically Integrated OEM’s: IBM, GE, HP
Silicon Suppliers: Intel, AMD, TI, Micron
System Manufacturers: Apple, Sun Microsystems
Equipment Manufacturers: Applied Materials
EDA: Cadence, Synopsis
Foundry: TSMC, UMC
Fabless Design/Distribution: Adaptec, Altera
Characteristics of
Semiconductor Industry
• Short Life Cycle
– Products tend to be out of favor quickly in the market
because of fast innovation.
– Moore’s Law: the
number of transistors
on a chip doubles
every 18 months
Source: IBM
Characteristics of
Semiconductor Industry
• Research and Development
– A great portion of revenues
is spent on R&D
– Needs to be done in order
to keep pace with
competitors
Characteristics of
Semiconductor Industry
• Increased Foreign Consumption
Characteristics of
Semiconductor Industry
• Decline of Japan, Rise of New Powers
Characteristics of
Semiconductor Industry
• R&D is getting more expensive & competitive: More
alliances with foundries at the centre
Source: IBM
Semiconductor
Industry Leaders
• By market capitalization (in millions of $)
INTC
TXN
TSM
AMAT
STM
AMD
Intel
Texas Instrument
Taiwan Semiconductor
Applied Materials
ST Microelectronics
……
Advanced Micro Devices
214,249.594
49,893.930
44,013.621
39,050.602
24,051.889
6,225.830
Semiconductor
Industry Leaders
• By Sales (in millions of $)
INTC
FLEX
KYO
TXN
IFX
Intel
Flextronics International
Kyocera Corporation
Texas Instruments
Infineon Technologies
……
AMAT Applied Materials (7th)
AMD Advanced Micro Devices (9th)
28,560.000
13,520.978
9,892.362
9,210.000
7,240.628
4,477.291
2,697.029
U.S. Semiconductor Industry:
Recap of 2002
• U.S. 2002 Sales = $70 Billion
• Worldwide 2002 Sales = $141 Billion
• U.S. Jobs = 270,000
• Percent of Sales Outside U.S. Market = 70 percent
• More than 30 Percent of Revenues Invested in the Future
– Capital Equipment = $10 Billion, 14 percent of Sales
– R&D Investment = $13 Billion, 18 Percent of Sales
Semiconductor Industry Stock
Performance
Stock Market Recap
• Topped out in 2000, then declined drastically in 2001
and 2002
• Slowly recovering in 2003
• Sales went from $200 billion to $140 billion
• More outsourcing: building own foundries too
expensive
• Expenditure in equipments gone from $50 billion to
$20 billion
Industry outlook
– Estimated sales of $163 billion in 2003:
• SIA:16% increase, adjusted from 10.1% in June
• Deutsch Bank: 12-13%
• Taiwanese Semiconductor: 15-16%
– Weak US$ helping
– Estimated future growth
• 2004: 19.4% (SIA), 14-15% (DB), 19-20% (TSM)
• 2005, 2006: under 10%
– Current capacity utilization rates at 86%,
compared to 61% in 2001
Estimated Future Growth
Source: IBM
Future Developments
• Productivity will continue to improve, though at
lower rates
• Revenue growth rate of the industry will continue to
remain lower than traditional rates leading to:
– Consolidation
– Growth and dependency on foundries and off
shore manufacturing
– Partnerships in development and manufacturing
Future Developments
• Investment in R&D required for leadership
will continue to grow
• More focus will be on innovative transistor
structures, materials, circuits, design, and
systems architecture
• More chipmakers moving from parts to entire
systems, consumer electronics, etc.
INTEL
CORPORATION
HISTORY
• Founded in 1968, supplying memory chips such as DRAM
and EPROMS
• Success of memory chip sales funded the microprocessor
design, which revolutionized the electronics industry in the
1970s.
– Intel’s 8080 chip was chosen by IBM in 1981 and
successively became the industry standard.
– 1990s, Intel’s Pentium and Celeron chips were installed in
4 out of every 5 computers sold.
CURRENT
• The world’s largest semiconductor chip maker, supplying
advanced technology solutions for the computing and
communications industries.
• Products include chips, boards and other semiconductor
components that are the building blocks integral to computers,
servers, and networking and communications products.
• Recent Products: Itanium for server market, Centrino for
notebook market, Pentium 4 3.2 HT for desktop market.
Business Risks
•
Competition: Intel faces competition from other firms in the industry
primarily based on product price, performance, bundling, marketing, and
customer brand loyalty.
– Top Competitors: AMD, IBM, Texas Instruments
•
Cyclical Nature of Semiconductor Industry: This is based on customer
demand, inventory levels, production capacity, and decelerating selling
prices
•
Fluctuation in PC market (Desktop, Notebook, and Servers)
•
Nature of Semiconductor Industry: The industry is based on rapid
technological innovations and the economical production of the subsequent
products. Therefore, Intel must continue to allocate a large R/D budget to
stay competitive.
Top Market Caps
in Millions
INTC
TXN
TSM
AMAT
STM
211,114.2
49,063.2
43,285.5
38,185.8
23,785.6
Segments
Intel Architecture Business
The Intel Architecture business develops platform solutions around microprocessors
and chipsets for end products in the desktop, mobile and server market segments.
•
•
•
•
•
•
Microprocessors: A microprocessor is the central processing unit (CPU) of a
computer system. It processes system data and controls other devices in the system,
acting as the ‘‘brains’’ of the computer.
Desktop Platform: In 2002, Intel’s Pentium 4 processor was the highest volume
desktop processor.
Mobile Platform: Mobile products provide notebook and laptop PC users with the
performance they need while providing wireless capability and meeting the power
consumption and size constraints of mobile PCs.
Enterprise Platform: The Enterprise Platforms Group provides microprocessors and
chipsets for server and workstation systems. XEON
Chipsets: Intel chipsets are compatible with variety of industry-accepted bus
specifications, such as the Peripheral Components Interconnect (PCI) local bus
specification and the Accelerated Graphics Port (AGP) specification. In addition, Intel
provides chipsets compatible with the following memory types: Double Data Rate
(DDR) Dynamic Random Access Memory (DRAM), Synchronous DRAM (SDRAM)
and Rambus DRAM (RDRAM).
Board-Level Products: All board-level products are based on Intel microprocessors.
Wireless Communications and Computing Group
The Wireless Communications and Computing Group provides
Component level building blocks for digital cellular communications and
other applications requiring both low-power processing and high
performance.
• Flash Memory: Although flash memory is currently used
predominantly in mobile phones and PDAs, it is also found in
common consumer products, including MP3 music players,
handheld voice recorders and digital answering machines, as well
as industrial products.
• Processors for Handheld Computing Devices: The Intel XScale
microarchitecture is used in many handheld PCs produced by Dell,
HP, Compaq, and NEC.
• Cellular Baseband Chipsets: Baseband chipsets are designed for
multi-mode, multi-band wireless handsets. Chipsets support multiple
wireless standards and deliver enhanced voice quality and high
integration.
Intel Communications Group
The Intel Communications Group provides silicon and integrated networking
and communications building blocks based on three focus areas:
• Ethernet Connectivity Products: Ethernet is an industry-standard
technology used to translate and transmit data in packets across networks.
• Optical Components: Opto-electronic components are electrical
components used in optical networking equipment, and Synchronous Optical
Network (SONET)
• Network Processing Components The Intel Internet Exchange
Architecture (Intel IXA) provides a flexible platform for the networking and
communications industry to build faster, more intelligent networks using reprogrammable silicon.
• Embedded Control Chips: Embedded control chips are used in a broad
range of applications, including imaging products, storage media, point-ofsale systems, industrial automation equipment and automotive systems.
Operating Performance
Segment Performance
Company Analysis
RATIO COMPARISON
Figures At-A-Glance
P/E ttm (trailing 12 mos.)
P/Sales ttm
47.39
7.49
Valuation Ratios
P/E Ratio (TTM)
EPS actual ttm
$0.68
Avg EPS Est Current
$0.29
Avg EPS Est 4 wks ago
$0.29
Beta
Market Cap
Avg Analysts Rating
Instit. Ownership
Company
Industry
Sector
S&P 500
47.39
52.53
36.88
24.98
P/E High - Last 5 Yrs.
162.62
92.73
65.56
48.07
P/E Low - Last 5 Yrs.
17.46
18.17
18.20
15.97
Beta
2.15
2.39
2.02
1.00
Price to Sales (TTM)
7.49
7.50
5.52
3.35
Price to Book (MRQ)
5.65
5.33
5.14
4.21
Price to Tangible Book (MRQ)
6.39
6.13
6.97
7.40
Price to Cash Flow (TTM)
22.05
30.73
26.49
17.37
Price to Free Cash Flow (TTM)
33.46
39.62
30.05
30.02
% Owned Institutions
58.04
53.63
48.59
64.67
2.15
$211.114b
1.8
3,532.5m
54.3%
Profit Margin Ratios
Profitability Ratios (%)
Company
Industry
Sector
S&P 500
Gross Margin (TTM)
53.34
46.69
51.27
47.12
Gross Margin - 5 Yr. Avg.
55.03
48.69
51.48
46.80
EBITD Margin (TTM)
23.73
16.77
13.99
19.35
EBITD - 5 Yr. Avg.
27.60
18.79
16.34
20.66
Operating Margin (TTM)
22.53
10.47
9.46
19.10
Operating Margin - 5 Yr. Avg.
24.16
13.98
11.38
17.75
Pre-Tax Margin (TTM)
21.74
10.82
15.59
17.34
Pre-Tax Margin - 5 Yr. Avg.
28.36
17.63
15.59
17.17
Net Profit Margin (TTM)
15.82
5.95
8.89
12.68
Net Profit Margin - 5 Yr. Avg.
19.15
11.39
9.15
11.27
Management Effectiveness
Management Effectiveness
(%)
Company
Industry
Sector
S&P 500
Return On Assets (TTM)
10.12
3.52
4.32
6.13
Return On Assets - 5 Yr.
Avg.
14.46
7.81
6.37
7.19
Return On Investment
(TTM)
11.89
3.96
6.64
9.62
Return On Investment - 5
Yr. Avg.
17.55
9.46
10.19
11.65
Return On Equity (TTM)
12.62
3.17
8.29
17.89
Return On Equity - 5 Yr.
Avg.
19.41
10.78
14.39
20.04
F/S Review
Acquisitions
Risk Assessment
Estimate Revisions: Pass
Shorted Shares: Pass
Speculators have either maintained or improved their sentiment towards this stock in
the past month.
There have been no downward analyst revisions on this
company in the past week.
Analyst
Downgrades
(last week)
# Analysts
Covering
# Downward
Revisions
Current Fiscal
Year
33.00
0.00
Next Fiscal Year
61.00
0.00
Days To Cover Shorted Shares
Days To Cover, Current
1.5
Days To Cover, Previous Month
1.4
Change
0.1
Price Deterioration: Fail
The price of this stock is substantially underperforming relative to its industry
Analyst Recommendation: Pass
4 Week Price Change
The consensus analysts recommendation for this company
has either improved or remained constant in the past four
weeks.
Analyst Recommendations
Recommendation
Buy (1) - (5) Sell
Current
1.76
4 Weeks Ago
1.82
Change
(0.06)
Company Price Change
4.0%
Average Industry Price Change
7.5%
Difference
Price Momentum: Fail
This company's price performance momentum is in decline. The stock's 4 week price
performance relative to its industry is less than its Adjusted* 13 week price
performance relative to its industry
Relative Price Performance
Institutional Selling: Pass
4 Week Relative Price Performance
Shares held by institutional investors have either
increased or remained constant.
Adjusted 13 Week Relative Price Performance*
Difference
Institutional Selling
(3.5)%
Number of Shares
(in millions)
Shares Purchased
401.8
Shares Sold
171.6
Net Shares Purchased
230.2
(3.5)%
2.5%
(6.0)%
Equity Analysis
Price History
Calendar Year
2002
2001
2000
1999
1998
High Price
36.78
38.59
75.83
44.75
31.55
Low Price
12.95
18.96
29.81
25.06
16.41
Year End Price
15.57
31.45
30.06
41.16
29.64
High P/E
79.78
205.29
50.28
42.46
36.56
Low P/E
28.09
100.85
19.77
23.78
19.02
Year End P/E
33.77
167.29
19.94
39.05
34.35
0.51
0.25
0.23
0.13
0.11
Dividend Yield
Price Performance
Period
vs.
S&P 500(%)
Actual(%)
4 Week
4.0
3.4
13 Week
18.0
13.2
26 Week
71.8
54.9
52 Week
61.2
44.9
107.6
76.4
YTD
Valuation
Dividend Discount Model
D0
g
Ke
B
Rf
Rp
=
=
=
=
=
=
D(1+g)
k-g
=
0.08
22%
22.26%
2.15
4.23% Using 10 year US Treasury
8.39% Premium over Rf
0.0976
0.26%
=
37.86615
Using P/E Multiples
EARNINGS PER SHARE
Quarter
MAR
JUN
SEP
DEC
Totals
P/E
2000
0.39
0.45
0.36
0.32
2001
0.07
0.03
0.02
0.07
2002
0.14
0.07
0.1
0.16
2003
0.14
0.14
0.25
1.52
0.19
0.47
0.53
=
P/E Using Current EPS
2003E
0.14
0.14
0.25
0.29
Using Mean Estimate
0.82
Historical Average
Stock Price
EPS
=
P/E Using 2003 EPS Estimate
33.23
0.53
=
P/E Using Historical Average EPS
33.23
0.82
=
=
62.69811
=
40.52439
33.23
0.75
=
44.30667
0.75
Analyst Consensus
Analyst Recommendations and Revisions
As of
11/21/2003
As of 4
Weeks Ago
As of 8
Weeks Ago
As of 13
Weeks Ago
(1) Buy
14
13
11
9
(2) Outperform
14
14
13
12
(3) Hold
6
7
8
9
(4) Underperform
0
0
0
1
(5) Sell
0
0
0
0
No Opinion
1
1
2
2
RECOMENDATION
BUY/STRONG BUY
-Appears to be undervalued using
discounting/multiple analysis
-Industry consensus
-Future growth prospects are high
Advanced Micro Devices
(AMD)
Background
• Global supplier of integrated circuits (IC)
o Personal, network computer and
communications
• Founded in 1969, based in Sunnyvale,
California
• Facilities in US, Europe, Japan and Asia
• S&P’s 500
• Stock Symbol: NYSE: AMD
Background Cont’d
• 2002 Revenue: $2.7 Billion
• Total Asset: $ 5.6 Billion
• 79% of sales is International (Up to 3rd quarter
2003)
Core Products Segment
• PC Processors
• Flash Memory Devices –cellular
telephones, networking equipment
electrically rewritten
• Integrated Circuits (ICs)
Foundry Services
Segment
• Fees for products sold to Vantis and
Legerity
• No longer manufacture products for
Legerity or Vantis
• Sell products previously manufactured to
Vantis through 3rd quarter of 2003
R&D
• Microprocessors
o 180 nanometer process technology  130
nanometer process technology
o AMD Athlon XP Processor
• Flash memory products
o 130 nanometer process technology
Net Sales by segment
• Core Product segment
o 99% of total net sales!!!
• PC Processors (65%)
• Memory Products (27%)
• Other IC Products (7%)
• Foundry Services segment
o 1% of total net sales
Net Sales by segment
Cont’d
Compare with Net Sales in 2001
• 28% decrease in 2002 for PC Processors
• 35% decrease for Memory Products
• 27% decrease for other IC Products
• 65% decrease for Foundry Services
Comparison of Net Sales
Quarterly Net Sales (2002 & 2003)
Net Sales by Year
4644
5000
1200
3891
1000
3000
2542
2857
2697
2000
1000
$ Million
$ Million
4000
800
600
953
902
600
686 715 645
508
400
200
0
0
1998
1999
2000
2001
2002
Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03
Comparison of Operating
Income
Quarterly Operating Income
Operating Income by Year
889
1000
100
0
-100 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03
0
1998
1999
2000
2001
2002
-500
-164
-321
-58
$ Million
$ Million
500
-200
-125 -123 -30
-300
-400
-500
-1000
-8
-301
-315
-600
-1500
-1225
-700
-590
Comparison of Net
Income
Net Income by Year
1500
Quarterly Net Income (2002 & 2003)
100
983
-100 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03
500
0
-500
-1000
-1500
1998
1999
-104
-89
2000
2001
2002
-60
$ Million
$ Million
1000
-300
-500
-146 -140 -31
-700
-900
-1303
-9 -185 -254
-1100
-855
Comparison of Net
Income per Share
Net Income per share--diluted
1
Quarterly Net Income per share --diluted
-0.03
0.5
0.18
0
-1
-2
1998
1999
2000
2001
2002
-1.5
-0.36
-0.3
-5
-0.54 -0.74
-0.42 -0.4 -0.09
-2.5
-3
-4
-0.5 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03
-2.49
-2.89
-3.5
-3.81
-4.5
Comparison of R&D
Quarterly R&D
R&D by Year
1000
816
636
642
651
467
400
200
0
0
2000
2001
2002
203 209 214
100
50
1999
172 178
245
150
200
1998
221
250
$ Million
$ Million
800
600
300
Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03
Other Valuations
•
•
•
•
•
•
•
Market Capitalization: $6.2 billion
52-week High: $18.5
52-week Low: $4.78
Debt to Equity = 0.91 VS Industry = 0.20
Beta = 2.82
Price to Book = 2.56 VS Industry = 5.33
Dividend Yield (5 year average) = 0
Stock Performance
Stock Performance
Stock Performance
Forecast
• Industry –Semiconductor Price-to-book ratio for
2003 = 5.33
• AMD’s book value per share for 2003 = $6.56
• Estimated share price = $34.96
• Current Price = $16.80 (as of Nov 21, 2003)
Recommendation
• HOLD
– Expectation of Industry Growth
– Expansion in China
– New facility in Germany
– Cost reduction
Applied
Materials
Questions to Answer
1. Is Applied Materials a Great Company?
2. Are the company’s shares selling at a
good price?
Company Overview
• World’s largest maker of semiconductor
production equipment
• Top customer: Intel - 10.1% of sales
Management Overview
• CEO: Michael Splinter
– Named CEO in April 2003
– 20 years at Intel – Executive Vice President
• Formerly, all 5 top executives had been
with Applied for 19+ years
Competitive Overview
Top 4 Equipment Manufacturers: Sales
7%
Applied Materials
12%
46%
35%
Tokyo Electron
KLA-Tencor
Lam Research
Competitor Overview
Top 4 Manufacturers: Sales Over Time
12000
APPLIED
MATERIALS
Revenue
10000
8000
TOKYO ELECTRON
6000
KLA - TENCOR
4000
LAM RESEARCH
2000
0
1998 1999 2000 2001 2002
Year
Q3
2003
Earnings Overview
Sales and Net Income: Last 4 Years
14000
12000
10000
8000
Net Income
6000
Net Sales
4000
2000
0
2000
2001
2002
Year
Trailing 12m
Earnings Overview
Sales and Net Income: Last 7 Years
14000
12000
10000
8000
Net Income
6000
Net Sales
4000
2000
0
-2000
1997
1998
1999
2000
Year
2001
2002 Trailing
12m
Earnings Overview
• Current Revenues (trailing 12 months)
– $4.7 billion
• Current Net Loss (trailing 12 months)
– $18 million
• Posted losses last 3 quarters
Income Statement
• Net Sales
– 31% decline
– 23% decline the year before
• R%D
– Relatively consistent
– Average of 15.3% of net sales over the last five years
• Gross Margin Percentage
– 50.8% in 2000
– 44.3% in 2001
– 40.6% in 2002
Balance Sheet
• Stability through the downturn
– Growing PP&E
– Stable Long-Term Debt
– Small Share Issuance
– Growing Stockholders’ Equity
• Issues
– $40 million in Notes
Cash Flow Statement
• Depleting inventories
• $57 million in new debt
• Stock repurchases to offset stock options
Great Company?
…I believe Applied’s past performance and
market share make it a great company.
• Are Applied’s shares selling at an
appropriate price?
Stock Overview
•
•
•
•
Current Share Price (Today): $23.79
EPS: $-0.01 (trailing 12 months)
Book Value per Share: $4.83
No dividends in company history
Ratio Comparison:
P/E Ratio
P/B Ratio
ROE
D/E Ratio
APPLIED MATERIALS
4.73
-1.87%
0.07
INDUSTRY
47.59
5.33
3.17%
0.20
Stock Overview
Stock Price: Last 5 Years
Stock Valuation
• Free Cash Flow to Equity
•
•
•
•
•
Revenues (analyst growth rates)
CFO (% of Revenues)
less Gross Capital Expenditures (% of Revenues)
Plus Net Borrowings (Debt / Capital * Revenues)
=FCFE
– Discounted back using investors’ required rate
of return (CAPM)
Free Cash Flow to Equity
2003
2004
0.05
5315.43
2005
0.08
5740.66
2006
0.11
6372.13
2007 TV
0.14
7264.23 7264.23
0.170
0.170
903.62
0.170
975.91
0.170
1083.26
0.170
1234.92
0.170
1234.92
0.13
0.13
691.01
0.13
746.29
0.13
828.38
0.13
944.35
0.13
944.35
0.07
48.37
0.07
52.24
0.07
57.99
0.07
66.10
0.07
66.10
FCFE
260.99
281.87
312.87
356.67
ke
discount factor
0.1705
0.85
0.1705
0.73
0.1705
0.62
356.67
64849.77
0.1705
0.1705
0.53
0.53
PV FCFE
222.97
205.73
195.10
190.01 34547.99 35361.80
16.67
63.68
1061.48
13.98
21.43
299.52
12.11
7.25
87.83
Growth rate
Net Sales
CFO as a % of Sales
CFO
Gross Cap Ex as a % of Sales
Gross Cap Ex
5062.31
Debt/total Cap
Net Borrowings
Value of Call
Number exercisable calls
Total Value of Options
Net equity
19.54
16.32
318.91
Total PV FCFE - value of calls
Net Equity
# shares outstanding
33546.48
1648.03
Price
20.36
8.63
5.51
47.58
1815.32
Variables
ST Growth Rate of Revenues
LT Growth Rate of Revenues
CFO as a % of Sales
Gross Cap Ex as a % of Sales
Debt/total cap
ke
2-12%
16.5%
17.0%
13.0%
7.0%
17.1%
Relative Pricing
• Industry P/B: 5.3
• Industry P/S: 7.5
• Justified prices based on these ratios:
– Based on P/B: 5.3 * 7.6 = $40.28
– Based on P/S: 7.5 * 9.6 = $71.76
Conclusion
• Applied Materials is a great company
selling at a moderately high price.
• Moderate Buy