Wednesday, March 12, 2008

Applied Materials (AMAT) Shareholder Meeting (March 11, 2008)

I attended AMAT's shareholder meeting yesterday. All in all, it was uneventful. Only two people asked questions, and I was one of them. (Quite a contrast from the Apple meeting.) The food was above average--Starbucks coffee, some fruit sticks, and pastries.

AMAT did have an excellent presentation showing that its nano-manufacturing technology was used in many applications worldwide. More specifically, the projected growth for products relating to LCD displays and solar technology was high, and AMAT indicated it was well-placed to achieve sales in those two areas.

Much of AMAT's revenue comes from Taiwan and South Korea. I asked what companies in Taiwan were AMAT's major buyers of products, and the CEO answered that it was mainly DRAM manufacturers. Such companies would most likely include Inotera and Nanya Technology; however, neither of those companies offer ADRs in the States. American investors can buy SMOD if they are interested in Taiwanese DRAM makers. (A search also uncovered this unrelated, interesting stock: TRCR.)

My original thinking was that if AMAT was projecting high growth in certain areas, its future stock price could be ascertained by checking its Taiwanese buyers' health. But the picture is more complicated, I found, because even if the Taiwanese companies buy more products from AMAT, overall prices need to stay stable to increase profits. Favorable margins are a key component of growth, and Inotera's President has said that a sharp decline in DRAM prices has caused Taiwanese DRAM makers to cut back on their capital spending plans this year. Thus, the question is whether AMAT's buyers will decrease overall spending and hurt AMAT's ability to sell more of its products. I don't know--the shareholder meeting, while well-done, left me with more questions than answers.

I did discover another (non-legal) definition of "deposition"--page 2 of AMAT's 10-K states that a deposition is also a "fundamental step in fabricating a chip. During deposition, layers of dielectric (an insulator), barrier, or electrically conductive (typically metal) films are deposited or grown on a wafer."

Overall, AMAT's shareholder meeting was professional and informative, but scarce on specifics.

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