Downgrading Applied Materials and KLA-Tencor to Hold
Applied Materials (AMAT ) **) and KLA-Tencor (KLAC ) to hold from buy, based on valuation and industry trends. S&P sees indications that next-generation 300mm purchases will face further delays. Existing 200mm capacity is very high, and significant expansion is unlikely. S&P believes these two companies are gaining market share and will lead in an upturn, but now sees a strong upturn unlikely until late 2002. With shares of these quality semiconductor equipment makers trading above trough valuations on price-to-sales and price-to-book valuations, S&P would hold but not add to positions for now.
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