FROM CBSMARKETWATCH-Equipment makers still smiling
Applied Materials sees sign of hope on the Web
By Binti Harvey and Tom Murphy,
CBS MarketWatch
Last Update: 3:46 PM ET Jul 30, 1998
Also see Tech Report
SAN FRANCISCO (CBS.MW) -- The mood in the semiconductor equipment
industry remains cautious at best, although several companies offered
glimmers of hope at a stock conference this week.
Applied Materials Inc. (AMAT), for example, was hesitant to make
financial forecasts at the BancAmerica Robertson Stephens Semiconductor
Conference in San Francisco. But its executives said they're confident
about the prospects for recovery, and expects the Internet to be a major
growth driver.
Others with similar points of view were KLA Tencor (KLAC), Cadence
Design Systems (CDN) and Electro Scientific (ESIO).
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Chip equipment makers are trading well below their highs, beset by an
oversupply of semiconductors, weak Asian economies and reduced capital
equipment investment. Most major companies in the industry reported
second-quarter results that significantly trailed analysts' original
expectations, and continuing uncertainty has kept share prices in a
narrow trading range.
"We're in a triple witching hour, caused by the Asian economic crisis,
chipmakers' quest for market share at any cost and the rise of the
sub-$1,000 PC," said Applied Materials Chairman and Chief Executive
James Morgan. Yet Morgan maintains an optimistic outlook for the
company, once it overcomes current unfavorable conditions.
Already rebounding?
Morgan said Applied Materials maintains the strongest position in the
industry. Morgan, who voiced confidence that a rebound already is under
way, said he expects the recovery's drivers to be stabilization of the
Asian economies, which should stimulate more aggressive investment in
technology, and the continued growth of the Internet.
Morgan said he sees the Internet's increasing importance to businesses
and consumers increasing chip demand, which would necessitate added
capital equipment investment. He also said he believes that computers'
increasing interconnection will boost the need for memory chips,
sparking renewed demand for dynamic random access memory and
re-establishing a supply-and-demand balance in that market.
Guarded optimism
Electro Scientific (ESIO) execs expressed hope the rapid rise in the
market for embedded memory chips will help it sell more memory repair
systems. Sales of those machines have been off a third from last fall's
level. "We are seeing an increasing opportunity in embedded memory
systems," said Joe Reinhart, vice president for business development.
See related story.
KLA-Tencor CFO Robert Boehike emphasized his company's strong balance
sheet, suggesting it will leave the company well-positioned to grow when
the broader chip industry regains its footing.
Cadence Design System, which makes chip design software, said it has
seen only "minimal" slowing as a result of the slowdown. Why? Because
chipmakers have to continue to design new chips even when sales of their
existing chips are in a slump. See related story.ÿÿ
Binti Harvey is a reporter for CBS MarketWatch. Tom Murphy is Managing
Editor.
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