Veeco Instruments-Who? Message Board

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Technology Stocks : Veeco Instruments-Who?

VECO 28.82

-1.1%

10:00 AM EDT

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From: Sam	8/17/2010 3:02:35 PM
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ML's take on the metrology sale Sale of metrology a positive. Reiterate Buy We view VECO’s sale of their metrology business as a positive. We believe this helps refocus the company more towards the high growth LED segment and saves about $40M in op-ex annually. While this could help the stock multiple over time, VECO might still trade at a slight discount to competitor Aixtron due to the modest impact of VECO’s exposure to the cyclical data storage business as well as AIXG’s higher margin profile and less volatile bookings. With this deal VECO’s net cash position is ~$11 per share, or roughly one-third its market capitalization, well above 18% for AIXG and a 20% average for front-end semicap companies. While concerns of near-term LED TV inventory digestion remain a headwind, we view the stock as an attractive long-term investment at current levels. New guidance is ex-metrology. No change to LED outlook VECO now expects September (3Q10) revenues to be $255-$280M versus prior guidance of $290-$315M. This roughly $35M reduction in revenues is related to the divestiture of the metrology segment. In other words, the September outlook for the LED & data storage segment remains unchanged. We had forecasted $128M in metrology sales in FY11, at 47% gross margins and $40M annual op-ex the metrology segment contributed to $0.30 of our FY11 EPS (@ 35% tax rate). Lowering PO to $58 due to multiple compression Our new CY11 EPS is $4.85 (versus prior estimate of $5.15) as we adjust our model to reflect the business ex-metrology. We use a sum of the parts analysis to value VECO. With multiples having contracted across the LED and semi equipment segments, our price objective moves lower to $58 (from $65). This is conservatively ~12x our CY11 earnings, and is slightly below our 14x multiple for competitor Aixtron. With significant upside, we reiterate our Buy rating on VECO.

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