CC Notes:
First, I should comment that I really like listening to Lam conference calls, even when they are bad news. Unlike most companies they really try for openness and honesty.
1) Order weakness. Lam expected $230M in system orders but only got $190M. The most unexpected weakness was in the US which was 45% of orders, and they accounted for about 1/2 of the order shortfall. Taiwan also showed some weakness. And Japan orders were basically non-existant after February due to need of Japanese companies to conserve capital for end of year evaluations. (Note Europe made up 30% of orders and Taiwan 13%.)
2) Expected orders. Lam expects orders will pick up moderately in the next quarter as Japan starts ordering again (hints of it already in early April). Also, Korea is starting to get its finances in order, so they are showing up with LOC's, so Korea should pick up from last Q orders.
3) Products:
a) Alliance is now 50% of revenues, and is expected to increase to 60% next quarter. Still improving margins on Alliance, although no numbers were actually given.
b) CVD is currently in a run-off with one other competitor (they think). Final phase of run-off should occur sometime in the next 1 to 1-1/2 months.
c) CMP polisher 4000 has slipped 1 quarter. Although hardware and process technology is working well, the software is still too buggy to ship (Author's note - hardly a surprise. I used to manage a large software group, and there seems to be a psychology prevalent in programmers of 'design it on the fly, and don't bug me.'.).
4) Market share: In general, they believe that they are currently stable in all etch categories Q/Q. However, for Y/Y they lost market share in Metal and Poly due to late introduction of new products last year. They expect to actually start gaining share in Oxide over the next year.
5) CMP. They had expected CMP to be their only product that would continue strong, but it experienced weakness along with etch. And this was true even for their OEM shipments (e.g. AMAT?).
6) General future. They expect to be able to maintain $230M in revenues for the forseeable future, but this is below their current break even, so they will be making further cuts to allow next quarter to come in with an EPS of (0.05).
7) Market weakness. They expect continued weakness in DRAM (only 26% of new orders were DRAM) since the overcapacity seems as bad as it was last year (due to shrinks), and Lam refused to speculate on when that would stop. (Author's Note: It will stop when it is no longer possible to perform cheap shrinks because the bulk of the installed equipment is too old. The manufacturers currently just install a new stepper, a new mask, and maybe one or two new pieces of general equipment (e.g. one new etcher). But at some point the bulk of the equipment will be too old to allow that and they will be forced to a major upgrade. The question is, when? I suspect that it is immanent given that the last major install was more than 3 years ago, and the average life is 4 years or so.) The biggest surprise in the industry was the weakness in logic and the US. (Author's Note: I suspect that some of this is due to end manufacturers working off inventory due to macro-economic uncertainty, since consumer demand does not seem to be significantly down.)
8) Trikon license allows Lam to use a process that may be very beneficial in 0.13 and 0.10 micron oxide etch.
9) Japanese joint venture is positioning this year.
10) It may at first seem that $190M in orders in the last quarter is substantially below the next quarter's predicted run rate, but it needs to be remembered that 20% of this quarter's sales were service oriented, and these 'orders' are not booked in advance. Also, as was said before, it is expected that orders would pick up this quarter.
Clark
PS For those who want to listen themselves, the number is 800-642-1687 and the access number is 45803. |
