| From Morningstar: Cymer CYMI reported good results for the third quarter Tuesday evening but expects fourth-quarter sales to be down 10% sequentially. We're keeping our fair value estimate unchanged at $25 per share as we have already factored slowing sales into our valuation model. During the third quarter, Cymer recorded revenue of $107 million, up 13% from the second quarter. The firm shipped 86 light sources with a currency-adjusted average selling price of $798,000 per light source. Sales of consumables and spare parts reached $39 million, the highest quarterly rate in Cymer's history. Gross margins of 47% came in slightly below the firm's previous forecast because of a write-down of older consumables inventory that negatively impacted gross margins by 1 percentage point. Reflecting industrywide conditions, the firm saw a significant drop in the utilization of its light sources during the month of September as chipmakers slowed production in an attempt to work off inventory. Cymer also received order delays from two of its customers in recent weeks. The firm stated that this slowdown could potentially persist for a few quarters, and, in response, Cymer is cutting its workforce by 124 employees, or 14%, and will slow production to draw down its inventory by 10%. As a result of the inventory draw down, the gross margin for the fourth quarter will be negatively impacted by approximately 7 percentage points and come in between 37% and 39%. It is clear that the chip-equipment industry is in the midst of a cyclical slowdown that could potentially affect Cymer's results for the next few quarters. However, it is often during these difficult times when opportunities arise to purchase shares of the sector's best firms at reasonable prices. Cymer's position as the dominant supplier of lithography light sources certainly makes it a stock we would glady purchase at our 5-star price. |
