Hello,
I typically refrain from posting comments on Silicon Investor but I have received a lot of e-mail this weekend about an article that was posted on this thread. If you don't have an interest in my comments just skip this message. I apologize for the length.
I haven't read all of the posts here but I have found a few posts that contain comments similar to the statements in some of our recent articles. A few examples:
From The Specialist: "The point about DUV not being around forever is true. However it will be around for quite some time, with tremendous growth over the next several years."
From the INFRASTRUCTURE article: "What propelled Cymer shares higher was the obvious fact that DUV steppers will continue to be the purchased for leading edge semiconductor fabrication for at least the next two years..... What we are going to say is that DUV is not going to be around forever and investors should be cautious when they extrapolate the past growth rate of Cymer."
Here is an excerpt from an article INFRASTRUCTURE re-released for TechInvestor 6/19/97. This article was actually published in our May Monthly Letter: "One can also participate in the growth of DUV steppers by investing in the shares of Cymer (CYMI). Cymer is a company that manufacturers excimer lasers used in DUV steppers and is enjoying spectacular growth."
Now we said for at least the next two years (and this can be easily stretched to three or four) because we have found it risky to discount future earnings and revenues out much more than two or three years. Yes, some people are comfortable discounting out farther than this and we have no problem with those preferences. I am not here to argue investment philosophy, we just like to lean conservatively.
Those comments we made in our article pointing out that there were five types of "Next Generation Advanced Lithography" under intense development were not intended to pan DUV or endorse any particular method. We made those comments just to alert people to the fact that things do change in the semiconductor business and there will be some good literature released regarding next generation lithography in "Semiconductor Fabtech". How long it will take for these new lithography processes to be used is something that no one can answer with a high level of certainty. If Intel is interested in developing EUV, and they are because they have placed R&D money on the table, we are going to pay attention. As far as what goes in today's fab even the most distant observer knows the device manufacturing community is focused on the purchase and installation DUV steppers. This will continue until these other technologies are ready for mainstream
use.
Again, from The Specialist: "The reason they are aggresively pursuing the post 193nm generation (Next Generation Lithography) is because of their understanding of the amount of R&D AND time that is required to make one (or more technologies) viable for insertion 7+ years from now."
From INFRASTRUCTURE: "The "Fab Rat" mentioned this morning that the device manufacturing community desperately wants to get past the use of DUV lithography and that is accelerating development efforts on all fronts."
Maybe the term "desperately" is what bothers everybody here. Does that that term sound more urgent than the word "aggressively" used by The Specialist? We did not mean to imply that these five new generations were going to be installed in today's fabs but apparently quite a few people on this thread took our statement as though the semiconductor companies were going to change technologies tomorrow. Someone also implied that we thought the device manufacturers were going to throw their investment in DUV equipment away. When did we ever say that? If you think we do not understand that DUV is going to be used to make leading edge devices you are grossly mistaken. To prove the point, go read the TechInvestor article we wrote about DUV earlier this year:
techweb.com
In the article that was briefly posted here we said that Cymer is a fine company with excellent near term prospects. There is no doubt that Cymer will generate a significant level of earnings and revenues from the sale of lasers to DUV stepper manufacturers. At that time the stock was trading near today's price. Over the past few weeks we have cautioned our readers about buying the shares as they were falling because they were dropping from an over-valued level. It has been quite evident that the Wall Street Community felt the same way. The opinion reductions, in our view, were made because Cymer shares ran to a price level that discounted too much of their future earnings growth. We can also add that by looking at the news it is apparent something has caused the company to restructure (note that "restructure" does not mean "cancel") some orders and that one or more customers is having some difficulty installing Cymer lasers in to their systems. This does not mean these problems cannot or will not be resolved. We expect to hear about these issues in more detail when Cymer's quarterly report is released.
Everybody knows that when a stock changes direction it is important to remove emotions from the decision making process. The drop and the volatility in the shares has created excellent trading opportunities for aggressive investors. There are those who own the stock at much higher price levels and I suspect they will have to exercise a great deal of patience over the next few quarters. It does not surprise me one bit to hear tales about Wall Street Analyst bashing and the bombardment of Cymer management with phone calls and letters.
On the analyst community: Brett Hodess (Montgomery) has a great deal of semiconductor manufacturing experience and is well-connected to the industry. I am not here to defend the analyst community or Mr. Hodess. There are good analysts and there are bad. It just so happens that we talk with Mr. Hodess periodically and feel as though he is one of the better semiconductor equipment analysts on Wall Street. This does not mean he is perfect. The opinion changes helped to accelerate the fall but they have also opened a window of opportunity for investors with a desire to own a stake in the company. I am not going to waste time arguing whether or not the street has overreacted to the news. This happens all the time on Wall Street so take advantage of the opportunity if you believe the story!
Final Comments: Our recommendation on the shares has not changed much in the recent weeks: For those with no exposure, we have suggested that they let the dust settle before making significant commitments although we admit that the swift price drop has made the shares much more compelling. We are looking for a place to initiate positions because we do not have exposure to the stock at this time (short or long). Very aggressive traders should have a ball with Cymer stock if they keep their emotions in check.
Good luck everyone!
Carl
Carl Johnson
INFRASTRUCTURE
infras.com
Disclaimer:
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