ALL: I got this after someone comented that Cabot would make Cymer the stock of the Month. It came today after I subscribed to the trial sub. I suppose it is old news. I hadn't been able to post it earlier
due to the site closing. My apologies if it has already been posted and I missed it.
CABOT'S STOCK OF THE MONTH
THE KEY TO THE FUTURE OF THE SEMICONDUCTOR INDUSTRY
Cymer, Inc.
The story you are about to read concerns a company that holds fundamental
responsibility for the progress of world computing. If it drops the ball,
progress will slow, this company's name will be mud and investors who have
pinned their hopes on its cutting edge technology will be sorely
disappointed. But if it succeeds (and we expect it to), investors who own
the stock today will be rich. The situation is clear, and the stakes are
huge.
But let's start at the beginning. In the early 80s a couple of young
physicists in California were working for a government contractor,
designing a deep-ultraviolet (DUV) light source for the strategic defense
initiative known as "Star Wars." Since the laser would be satellite-based,
quality and reliability were utmost concerns. But priorities and budgets
changed. So in 1986 these two men, Robert Atkins and Richard Sandstrom,
started their own company, Cymer, to develop this unique light source for
applications in semiconductor microlithography. At the time there was no
market for their laser. . . . .but they knew their time would come.
The key to this "knowledge" goes back to a man named Dr. Gordon Moore, the
founder of Intel and a near-god today in the computing industry. Back in
1965 Dr. Moore wrote that "the power and complexity of silicon chips will
double every 18 months with proportionate decreases in cost." This was an
extremely optimistic, far-reaching statement at the time, yet an incredible
32 years later, Dr. Moore is still being proven right. In 32 years the
power of a silicon chip has doubled 22 times! And Dr. Moore's
pronouncement has assumed the mantle of a law that economics demands and
science fulfills.
Anyway, Atkins and Sandstrom, looking far down the road, saw that a time
would come when the standard mercury-arc laser would eventually be unable
to meet the demands of the silicon chip-making industry. That meant
opportunity for the purveyors of the next-generation laser system. And so
they spent most of the next ten years in research and development, making
sure their laser would be the one to fulfill that demand. It's hard to
exaggerate the rigorous nature of this science. But we believe that again,
quality and reliability were paramount. And we believe the company
achieved its goal, with a short-wavelength, deep-ultraviolet (DUV) laser
that makes possible the high-volume production of next-generation silicon
chips, with circuits smaller than .25 micron, or
1/400th the width of a human hair. It's as robust as a machine can be. In
typical operation, the laser fires five to ten million times a day, for
months at a time! Of course, it's protected by patents.
Then in 1996 the market was ready. . . . .and the floodgates opened. In
that one year Cymer's revenues exceeded the revenues of the previous ten
years put together. The company was taken public. And the stock took off
like a rocket. . . . .a rocket that climbed straight and true. Until last
week, when it ran into some turbulence and a flurry of selling pressure on
anticipation of weaker third quarter results. But the long-term picture
remains bright!
Consider Cymer's position. Semiconductor manufacturing is not a just a
niche of the computer industry. It truly provides the building blocks of
our modern high-tech society. Almost everything people use today from
computers to telephones, cars, furniture, food and books is at some point
impacted and typically improved by the use of semiconductors. Yet Cymer
doesn't make chips. It doesn't even make the machines that make the chips!
It simply makes the most important part of that chip-making machine. . . .
.the laser. It sells this laser for $450,000. But it hardly needs a sales
force, in the conventional sense. Its primary customers are the world's
five (that's all) manufacturers of deep ultraviolet photolithography
systems (ASM Lithography, Canon, Integrated Solutions, Nikon and SVG
Lithography). Systems made by these five have already been purchased by
every one of the world's ten largest semiconductor manufacturers (Intel,
Motorola, NEC, etc.). And these chip companies are going to be buying
plenty more in the years ahead.
The goal of all these companies is to reduce the size of their chips and
the chips' power requirements by reducing the width of the lines on the
chips. This brings about both faster performance and lower cost. And DUV
won't be obsolete anytime soon. CEO Atkins says it has the potential to
approach .10 micron dimensions in the future, a leap that should enable
Moore's law to continue well into the next century. . . . .and keep Cymer
on top of the industry. There is not much competition. The only two
competitors, Coherent and Komatsu, offer such less-advanced DUV lasers that
Cymer's market share tops 80%. . . . .perhaps 90%.
In sum, Cymer is in the unique position of being the primary supplier of a
critical enabling technology for the competitive battlefield that is the
semiconductor industry. It is experiencing the fastest growth of any
semiconductor equipment company ever, according to Atkins. Such rapid
growth does not always come without growing pains. But Cymer has hired top
managers with experience at running such companies. We are confident that
if it can just keep up with the demands of the market, it will be several
times larger in a few years, and the stock will be several times higher.
There are 28.5 million shares of stock outstanding, of which 14% are owned
by management. In the quarter ended June 30, revenues grew 318% to $50.1
million, while earnings soared 269%, to $.48 per share. At the time,
12-month rolling backlog totaled $122.8 million. And there is no debt.
IMPORTANT NOTE: Cymer's stock was due for a 2-for-1 split on September 11.
If that occurred as scheduled, all stock prices and earnings here should be
cut in half.
Cymer has been a super-strong stock. A few weeks ago it hit 98 1/2 . That
was followed by a normal period of consolidation. Then on Friday,
September 5, the stock began tumbling, on big volume. Unfounded rumors
circulated. And investors with little conviction sold first and asked
questions later. But the follow-through this week has been normal, and the
stock still rests over 25% below its recent high. This is your opportunity
to buy a piece of this great company.
Cymer, Inc.
(CYMI OTC)
Recommendation: Buy
Address: Cymer, Inc.
16750 Via del Campo Ct.
San Diego CA 92127
Telephone 619-487-2442
web site cymer.com
Buy Cymer (CYMI-OTC) current price 67 profit to date 35%
(date of initial purchase 5/7/97 initial purchase price 50)
Cymer's RP line pulled back sharply when the stock sold off this week. The
selloff was triggered by investor concerns about third quarter earnings
when management spoke of "pushing out" shipments to one slow manufacturer
from the third quarter to the fourth quarter. Nothing has changed
fundamentally at this fast-growing company, and we believe the current
correction marks a great buying opportunity. Cymer is the Stock of the
Month with this Letter. Buy. |
