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Technology Stocks : ASML Holding NV

ASML 1,410

+4.3%

2:12 PM EST

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To: Cary Salsberg who wrote (966)	4/18/2005 4:45:07 PM
From: Sam Citron	Read Replies (2) of 43397

Hi Cary, I had a look at what Morningstar said about ASML's relationship with Zeiss, and quote it here for discussion purposes: Although ASML is focused on profitability, it must continue to spend on R&D to remain competitive. Reducing its materials cost and expanding gross margins will also be difficult given ASML's limited leverage with certain component suppliers such as Cymer CYMI and Zeiss. Cymer holds pricing power as the dominant supplier of lithography light sources. ASML is even more dependent its sole source of lithography lenses, Zeiss. ASML's own annual report states plainly that ASML "would effectively cease to be able to conduct our business" without Zeiss. Lacking alternate suppliers, we'd argue ASM is at a disadvantage to rivals that have internally developed lenses at their disposal. As a start, I'd like to focus on Morningstar's somewhat superficial conclusion that ASM's relationship with Zeiss is a disadvantage. Zeiss makes the best lenses in the world. Why make if you can buy? The relationship could easily be a competitive advantage for ASML, just as a camera that uses Zeiss lenses enjoys a competitive advantage to its peers. Sam

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