*AV* -- As I am listening to the CYMI Quarterly Conference Call now, I am replying to this message. The Quarterly numbers were outstanding and the call is very upbest. They own the market, they see some softness in the upcoming quarter but they are alreadt way ahead of their expectations. Admittedly visibility is hazy for the immediate future, but there are a great deal things to be proud of. They authorized an aggressive stock repurchase program. They expect to make up some of the revenue issues with service and spares for existing systems, and they are right on schedule with all their advanced development of lasers for their customer needs. They are taking the INTC approach to moving ahead even within these uncertain times in order to distance themselves from their competitors. They have more than enough capacity to ramp up for customer needs should a quick change of fortunes occur.
They did say they are preparing for a 10-15% reduction in base laser revenues for new steppers. Deep UV steppers will not be affected as much this year as the i-line systems.
What is very interesting is that they believe the delay to 300mm may not impact them too much. They posed the view that companies may actually convert to advanced technology (0.25u or below) requiring DUV steppers at the existing wafer sizes and not wait for the 300mm conversions or new fabs.
This is a very significant point since I have mentioned previously that we have many factors occurring at the same time: technology, new wafer size, AND new equipment platforms for the new wafer sizes. My opinion is the same as CYMI's, if 300mm is pushed out and the equipment deliveries of the new platforms of 300mm tools are likwise pushed out, the technology advances will still proceed. It may actually be easier to deal with the new technology learning curve first, then worry about the 300mm down the road.
No cancellation of KrF lasers have occurred to date. A few pushouts but no cancellations. No pushouts occurred last quarter. Customer breakout for 1997 was Nikon (39%), Canon (25%) ASMLF(24%) SVGI (6%).
Customers are moving down the learning curve in DUV much faster now than at the initial implementation. Faster ramp up times are occurring within this area. Lead times for newer tools from CYMI are getting shorter and shorter to integrate with the actual steppers.
There will be two new product introductions (5500 and Orion) this year to advance the capabilities of the system. They are expected to garner much higher ASPs and margins because of the functionality it will provide. Customer support group has grown dramatically. Have doubled the number of offices to support the installed base. Customer service is going to be a nice profit center for the company. Need to still increase this infrastructure since more and more systems will be proliferating through to the market in 1998. Most of the Japanese companies are in full production along with the IBM Manassas plant in the USA. No new developments in the Komatsu patent litigation.
Backlog $109 million
Captial Spend $12 million
809 employees
Depreciation for QTR was 2.7 million
BTW-SVGI is definitely the far and away #4 DUV stepper provider.
Andrew
PART 2
Stuff from the Q&A session:
1. No cancellations because no one wants to be sent to the back of the line for these lasers. Even the pushouts are very difficult to get.
2. $50 million stock repurchase would retire 11% of the common stock but if the same money is applied to the convertible bonds, they could retire close to 40% of that bond debt. Question was why they do not go after the convertible bond since it now sells for a premium. Question was asked to be taken offline so no answer given.
3. Both Nikon and ASMLF have both decided (as of Dec 1997) that the market could bear an increase in the proce of the DUV steppers. Why??? Because of the benefits and capababilities of these systems, they feel the IC manufacturers can bear the price increase. At least they are being honest about supply/demand economics. The customers will have to pay through the nose to get the benefits of DUV. This means we will see a nice pop in earnings from the steppers guys.
4. The above was a response to the question asked relative to pricing pressures CYMI might be experiencing from their customers. Their responses was that they were getting involved in interesting discussions relative to price concessions but discussions tailor off when they mention the Dec 1997 comments summarized in #3 above<GGG>
Bottom line: CYMI is a great mid to long term buy at 80% market share.
Andrew |
