Sorin,
Thank you for relating your experience. It sounds sensible for Cymer. I bet they invoice when the order is placed, then when they ship and then when the customer accepts it. I'll buy that the final payment comes in 60-90 days. My problem is that Cymer's receivables are at 90 days, not 60-90. That shows no discipline in the customer relationship. I've worked with Japanese customers and it looks to me like Cymer is very vulnerable. Common practice for Japanese companies is for them simply to not pay American customers if the Japanese feel they have leverage. If Nikon decides that Komatsu has a viable alternative after all, it would be within character for Nikon to simply not pay until it is convenient for them (perhaps that is what is happening now which is causing the uncontrolled receivables). Though Cymer is profitable, I believe they are still running at negative cash flow. Wallstreet looks closely at this. As long as the receivables are so big, we are all vulnerable to a big negative earnings surprise if Cymer wakes up and decides they have some doubtful accounts. Also, depending on how the receivables are denominated, we may be facing currency risk.
Though Cymer's revenue growth is impressive, their rapid growth of expenses and their balance sheet indicate that the company is a little out of control. They've increased their service group by 50% in each of the last two quarters. It is now approaching 200 people. This is a big expense and management burden to take on in so short a time. I believe the next challenge for Cymer is to start to turn their revenue and profitability into cash and to slow down the expense growth rate just as their top line growth rate is expected to slow. For a young company (Cymer is 10 years old, but they spend 9 years as a development stage company), this is a critical time. |
