Electro Scientific sees opportunity
By Tom Murphy, CBS MarketWatch
Last Update: 1:26 PM ET Jul 29, 1998 Also see NewsWatch
SAN FRANCISCO (CBS.MW) -- Since Electro Scientific Industries Inc. posted
disappointing earnings earlier this month and warned about future sales,
its stock has been dangling near a 52-week low. No surprise there.
On Wednesday, however, the Portland, Ore.-based chip equipment maker (ESIO)
said it's seeing some signs of hope. Specifically, its laser repair division,
whose orders are off a third from last fall's high amid a slumping market for
dynamic random-access memory chips, is seeing new revenue from embedded-memory chips.
Translating from geek-speak, that means Electro Sci is teaching its old-dog machines
new tricks that could make them popular with a fast-growing segment of technology --
the demand for chips used in such devices as cell phones and hand-held PCs.
What's more, the company claims an 81 percent market share in the laser repair arena,
which is now "holding up very well," according to Joe Reinhart, vice president for
business development. "We are seeing an increasing opportunity in embedded memory systems," he said.
To be sure, some good news is welcome. The laser repair units accounted for sales of
$26.7 million in fiscal 1998, ended in May, down from $28.4 million in the prior year.
Overall company sales, however, rose to $229.6 million from $180.0 million the year before.
Electro Sci earnings of 54 cents a share in its fourth quarter were 17 percent below
expectations, and of the five analysts who track the company, two now rate it a "hold."
The remaining three have it ranked as a "buy," according to Zacks Investment Research.
The company is undertaking a cost-cutting effort to bring earnings into line with reality,ÿ
but Reinhart said those will be "probably not dramatic" because the company is sitting on
$39 million in cash and doesn't want to sacrifice the infrastructure it has carefully built
up over the past several years as it grew through acquisition and an expanding market.
After his presentation, Reinhart acknowledged his company's visibility is still limited.
But he pointed out it is well-positioned to rebound once the market improves thanks to a
diverse product line that also includes its mainstay capacitor production and
yield-improvement products.
Shares inched up 1/8 to 25 1/4 after his remarks, but have a long way to go before returning
to their year's high of $64.ÿÿ ÿ |
