Transcript of Cymer Conference Call, Part 1
I'm having a transcript of the conference call made. I have Akins' prefatory remarks and about a third of the Q&A session done so far. This and the following post cover this much. I hope to have the rest soon. If there are any spelling or other mistakes, please email me so I can get them corrected in the remainder.
Good morning and welcome to our conference call today. We will be featuring the management of Cymer Bob Akins the chairman and CEO and
Bill Angus the CFO. There has been a lot of rumor and misperception bandied about on the stock recently so this is a great opportunity for Bob and Bill to discuss the reality of what is going on in the market place and with their product. We are going to keep the call to 60 minutes today after some prepared remarks we will open the call up to questions and answers and with that I will turn the call over to Bob and Bill.
This is Bob Akins of Cymer. Good morning ladies and gentlemen. I want to start off by thanking Bret for this conference call and an opportunity for us to talk about the facts as opposed to speculation.
I want to start off by saying that Cymer is the market leader in laser light sources for lithography. We know our business intimately. As we remarked on many occasions we work with our direct customers on a daily basis in their factories 6-7 days a week. We work with the chip makers that have DPV [can't understand what he's saying here. Don't think it's 'Deep UV'. DPV is best guess] tools. We are in all the stepper companies, we are in all the DPV chip companies. We understand what is going on and I want to assure you that the fundamentals of this business are strong. Chip maker demand for DUV is strong and remains unchanged. Demand for Cymer's laser remains strong. Competitiveness of Cymer's laser product itself remains strong, and certainly nothing has happened over the past 12 days or so that doesn't go on in this industry every day as I will be discussing with you in the next few minutes and there are no issues that been raised that we or you should be concerned about.
I want to talk a little bit about the misunderstandings that have occurred over the past 12 days, certainly precipitated by Cymer's nonparticipation in the Needham conference on September 3. As we had discussed in a press release, we had a last minute notification of a customer push out. This push out in orders was significant in that it had the potential to have a material impact of the quarter if not resolved. Under the circumstances we thought it appropriate to withdraw from the conference to assess that situation and our response and to work the issue to resolution. We were able to do so. How did we do that? Well we pushed back in the customer who pushed out the order and convinced them that load leveling their laser deliveries from Cymer was the right thing to do. That took care of part of the problem. To fix the rest of the problem we reconfigured our manufacturing so as to supply additional lasers to our other customers whose demand remained unchanged.
For example, that meant that lasers that were in final test for the customer who had a push out, if they were in their first few days of final test the final test was terminated the laser was removed from the test base, lasers for customers who needed delivery in the short term were inserted in their place and the tests resumed. That means you lose time on every laser and test and because of that time lost, things become tighter in the third quarter. That is additional risk that Mr. Angus referred to in one of our press releases. The issue was resolved, not without risk, but Cymer is working the issue.
As we stated in the second quarter earnings release and again in our Sept. 8 press release, I said something like, "Cymer's business is no longer simply determined by Cymer's ability to execute a manufacturing ramp-up, but on top of that all, on top of that in addition, our customer's ability to execute themselves and to ship steppers enhanced ['deep more'? That's what it sounds like.] lasers from Cymer. Certainly the granularity of our business with only four customers, three dominant customers, dominating the majority of our business, is adding to that kind of short-term fluctuation in orders. This kind of push out from a customer has happened before, we expect it will happen again. As it happened before in the past, it didn't align within hours of a major financial conference. So the issue came up, it was resolved and in relatively short order as this was, and was transparent to the outside world. We expect that it will continue to happen. We can't be anymore open than we have been.
As you know, because we are in all the companies, because we are aware of all chip makers and their schedules using this equipment, confidentialities that we have with respect to our direct customers and chip makers are very serious documents. Obviously market share is in the balance here and Cymer cannot be seen as the company that compromises one of our direct customer's confidentialities just to make our life easier for offering more explanation. Please understand that we have to always operate with respect to those confidentialities. We chose in the three working days following that conference, Wednesday Thursday, and Friday, we chose to work the issue to resolution as opposed to talk on the telephones and simply fuel the speculation that was starting to grow. And because we chose to focus on working the issue, we resolved it and were able to announce that on Monday. I would also like to address on a separate matter the fact that there have been some issues raised recently about Cymer's laser, technically, and the laser performance especially as it might be impacting Nikon Corp. and their coming year. I believe that in our Sept. 12 press release we address that issue in no uncertain terms, as you are aware, quoting Mr. Shimomora who runs the Stepford division of Nikon responsible for the majority of the companies profits, specifically saying that there are no technical issues of Cymer lasers that are keeping them from shipping product and went on to say that their steppers and Cymer lasers are being shipped to chipmakers worldwide and in use for advanced chip production. I'm not exactly sure how this situation got started but we decided to go right to the heart of the matter and confirm with Nikon whether or not there were any issues that we were not aware of and indeed that is not the case. We have a continuous improvement program underway as we detailed in our press release. As you know any semiconductor equipment company has such a continuous improvement program underway. We have openly discussed it in past quarters we have proactively moved to take solutions which have been developed more recently and put them into our lasers to be sure our lasers operate correctly under full-duty-cycle use at the chip makers. There are no fundamental technical issues in Cymer's laser; as far as we are aware our competitiveness remains unchanged. In fact I will point out that continuous improvement programs is a luxury that a company who has a strong market position has to exploit. As you know our competitors are still working to develop technology that will give their lasers basic performance levels which will meet the direct customers needs, let alone worry about solving some of the issues that come up in mass production of the lasers themselves, and would be relevant to lasers operating in high-duty-cycle mode in full production at the chip makers, so this is an area of competitiveness that our competitors have yet to even explore. That is about all I have to say right now so I would like to open this up to questions.
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