Hi Sam,
Please reread my last post. I did read the NVLS report and you did not waste my time.
RE: "We do not believe the company can reach this level when it
hits these revenue points."
Ever?! Obviously, not. Since revenues have been at that level recently and margins have fallen short, I liken the statement to we do not believe it will rain yesterday. One factor that negatively impacted NVLS's gross margins last quarter was actually a good thing. Normally, revenue is not booked when the product is shipped, but when the customer signs off. In this case, both revenue and COGS are deferred and so is the cash payment. NVLS has agreements with the customers for tools that are the same as others that have already been accepted and installed. NVLS receives 80% of the payment upon shipment and 20% upon acceptance. This is problematic because NVLS records 80% or the revenue and 100% of the COGS. If gross margin on these tools is 50%, 100% expense and 80% revenue produces a gross margin of 37.5%. Future quarters are helped by the 20% revenue with no costs.
RE: "...the company has struggled over the past two years internally on the execution front."
Yes, it is a struggle to develop new products in PVD and CMP that can take on AMAT. Only NVLS takes this on and succeeds. "Execution" sounds like someone dropped the ball, but that is not the case.
RE: "...the company is experiencing heightened competitive pressures..."
I think the pressure is not "heightened". After 7 years, NVLS has a superior PVD product that is ramping up. By the way, ramping the revenues of a new product is the prime reason gross margins are not expected to improve next quarter.
RE: "...the company has struggled with its last acquisition, SpeedFam-IPEC."
NVLS has stated in its CC that it has not lost any money on the SFAM acquisition. Of course it "struggled". SFAM had lost almost all market share and had no competitive product. As is pointed out in the article, NVLS believes it has a superior product for 65nm and expects a significant revenue ramp in 2006.
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