Conference Call Transcript/Summary
I just listened to the conference call, and here are my detailed notes. I apologize in advance for any errors.
Conference Call Summary/Transcripts
Akins
technology and product development
"on schedule" for new products in 1998
competitive bar raised more than ever
5010 shipping began in March, one month ahead
received bookings for second quarter
continued research on the Orion
Orion to ship in 3Q
twice the average power, with further refinement in pulse stability
increase wafer throughput by 15%
worldwide infrastructure enhancements
new lease in Japan, doubling office space
improved field service expertise, rotating from field service to manufacturing in San Diego and Seiko
improving processes through Cymer
new Vice President for Process Quality position starts next week
Angus
review of first quarter statistics, see press release
gross margins was 38.3% vs. 40% for 4Q 1997
declining sequential revenues as expected
R&D 16% of revenue, 3% increase over previous quarter due to 5010 and Orion
.09/share diluted
30% tax rate expected for whole year
cash equivalents at $98 million, long term at $69 million
$90.9 million backlog, down from prior quarter
continued DRAM imbalance and Asian problems
5010 price negotiations are affecting order flow
reduction of advance bookings due to customer confidence in Cymer's billing
ASM 34$, Nikon 28%, Canon 27%, SVGI 8%
earnings release moved to 4th week of month following quarter
Bob
Asian problems to continue
softness in North American market
clearly will be impacted
relatively flat revenue for next quarters
discussion of Cymer's position
2 1/2 years ago, the 5000 series in Q1 1996 would be competitive for 18 months
the 5000 will have provided 30 month lead
continue to be only manufacturer of excimers in volume to meet demand with worldwide support
5010 and Orion coming
continued aggressive R&D spending
production volumes of Orion in early 1999
relatively flat revenues will lower EPS for next quarters
turnaround is inevitable, want to be ready
DUV lithography experiences preferential adoption
only small fraction
compound growth rate for 28% through 2001
300mm wafer delay increases interest in sub 0.25 micron
KrF DUV advances suggest practical lifespan increases
0.10 micron achieved through KrF DUV -- NSM, etc.
DUV "entrenched" as light source of choice
ArF for 0.08 by UT Austin
Q&A
Maher from DLJ
"Congrats on good quarter"
what about weakness in US market? Please elaborate. Coincident with Korean and Japanese weakness. Provide outlook for Japanese capex. Also, what about levels of inventory at customers?
A: weakness in many regions, few seem to be getting a lot of attention, there are signs of weakness in US. Overall decrease in demand for chips. Also, rapid selloff in DRAM inventory in attempt to raise cash added to price imbalance have further impat. Uncertainty about PC driver. (Bill) Inventory at integrator at normalized situation, approximately 340 units. That is okay for the moment, but future market circumstnaces may dictate otherwise.
Q: Industry estimates for DUV steppers expected to ship in 1998?
A: latest DQ number is on order of 450-500.
Q: Laser shipments above that given integration time?
A: No
Q: working down inventory then?
A:
Morgan Stanley analyst
Q: service revenues?
A: won't break them out separately
Q: 350 lasers in inventory at stepper at last quarter? 340 this time, so implied a flattening?
A: (dithering) No. number based on account at number of quarter, and more in transit
Q: Unit shipments for quarter?
A: Won't break them out, sales and marketing more paranoid, so don't want to give info to competitors.
Q: Inventory picked up quarter over quarter, explanation?
A: working very hard to get suppliers up to speed, as we decelerate, more inventory than we might have liked, can't ramp down suppliers that quickly. Also bnilding spares inventory.
Q: Tried to implement price increases, successful?
A: newer products had higher selling prices, remains to be seen what effect will be on older 5000 series.
Hodess, NB
Q: sense of customer profile, early adopters of 5010, cannibalization
A: (Akins) shipped 5010's but will not name customers, enables high end steppers and first generation scanners, demand for those tools is such that there will not be much cannibalization, wouldn't be surprised to see those lasers going on to chipmakers at relatively high speed
Q: more geared to logic vs memory?
A: no, more a function of inreased process accuracy, independent of end application
Sanders, Nezzam ?
Q: more detail on SG&A investments, doubling of inestment in Japan. How about stepper customers?
A: not doubling spending only square footage, actually getting preferential rent, building sales and marketing infrastructure, called in with stepper customers to make presennations to end users
Q: be more specific on "tycoon" investments
A: we are investing in people, intend to bring on board who have specific expertise, sales and marketing expenses flat as a percentage of revenues
Q: what about Seiko relationship? anything new?
A: business continues to run smoothly, Seiko runs at 7 lasers per month or so, continuing forward for next few quarters, will utilize their factory to increase the factory of the field service engineers in Japan
Jones, ICMC Asset management
Q; Question about competitive landscape, coherent qualified for 193nm later at stepper manufacture, comment on this
A: marketplace will always try to qualify multiple suppliers
Q: Has 193nm qualified?
A: we see qualification as manufacturing term. We have been shipping ArF lasers for process development for a number of years. We have a larger installed base of ArF than any company.
Graham Hay, from Legal and Something
Q: give me an idea on relationship to Japan and US with respect to chipmakers ongoing efforts to reduce line widths, is this proceeding as we have heard/ Also comment on plans for physical expansion. Focus on increasing efficeiny
A: chipmakers have invested heavily in 0.25 are seeing relatively controlled evolution to 0.25 micron process. Larger chipmakers are investing in 0.18 process. At same time, others have raced in and are seeing difficulties and having problems with the process. They need more time to get the desired levels of predictability and yield. As for capacity, we discussed that the raw capacity to produce 1000 lasers per year, so there will be no more capacity expansion this yaer, but focusing on improving first pass yields of process.
Q: what are those other issues that chipmaerks are facing?
A: new photoresist have to see stripping and ashing technologies that are competitive, CMP process seeing challenges, a whole family of processes need tuning and this is not unusual as the chipmakers continuously improve processes
Schmidt, Northgate
Q: say something moer about competitive situation with regard to Komatsu and end user feedback
A: continue to expect competition, they have contracts with Komatsu for prototype units, only contracts they have are prototypes, trying to incorporate competitors, only company to have demonstrated, worldwide service capability, finding that is a significant comtribution to competitiveness
Q: say something about mix of revenues this quarter to last quarter? update on cycle life of replacement chambers?
A: spares service revenue for this quarter are 10.3% of revenue, reasonable to assume that we shipped fewer units than previous quarter; (Bob) expected life is 3 billion pulses for 5000 series, have achieved longer than that, 5010 will have 4-4.5 billion pulses, so offers lower cost of operations
Q: what is that in time?
A: depends on conditions, of course, but different steppers and scanners have different efficiencies. in a typical condition, 2 discharge chambers per year, approximately.
Tracy Fu from DMG
Q: chamber lifetime issue for ELS-5000 vs Komatsu
A: both competitors have made paper claims about chamber lifes of 5 billion pulses. At Cymer, we found very significant differences in house vs in the field. Only talk about real results. When one normalizes, different picture is painted, it's hard to judge performance of competitor products, so comparisons are very hard
Pichenko, from ABM Ambro
Q: Nikon percentage of sales. 29% to Nikon, down from last quarter, ASM gaining share
A: no effect from Komatsu on revenue split, absolutely none. Japanese market is in retraction from capex standpoint. This is Nikon's home base, so Japan being down affects Nikon. Rest of Japanese market has been Canon. No knowledge of any market share losses to competition.
Q: what about Orion? what abot bandwidth? doubling pulse frequency as well?
Orion is 20W laser. Delivers power by doubling pulse repetition rate. When used with a scanner (Orion's purpose), the future of the industry, increases in speed of scanner can be achieved. Pulse energy speed can be achieved in dosage accuracy.
Scott Someone from TCM Partner
Q: If you have all this inventory, how can you have sequentially flat revenue?
A: spares sales will compensate for fewer units.
Q: Are spares at lower margin?
A: No, but additional warranty reserves for newer products will affect results
Q: Last year shipped 500 units for year? How long to sell through 340 units? How is it recognized?
A: once we have shipped or delivered, we have revenue. In Japan, there has been a six month integration time.
Q: Next two quarters a little squishy?
A: We said we see two flat quarters.
Tim Murphy from Capital Research
Q: How abour marketing efforts?
A: We have been able to articulate better that laser is value added portion of lithography tool. Mercury bulb was seen as limited so did not enable performance of stepper. Conversion from mercury to excimer laser, so performance increases can be attributed to laser itself. A number of chipmakers are trying to learn more about the laser and what exactly it does.
That's it. |
