Thread, the annual meeting was today. I had been impressed with management before, just listening to the conference calls. After meeting them in person, I was doubly impressed.
I played a round of golf after the meeting, and am now sitting in a Kinko's so I can recap the day's events. I met Scot McI, and he took copius notes. I will wait for him to post them and then I will fill in any items I caught but missed. (Forgive the spelling mistakes, at $12 bucks an hour at Kinko's, I'm just typing fast.)
I thought Bob Akins and Bill Angus had a superb grasp of the issues facing them, and we couldn't ask for more honest, forthright executives.
The following are the questions sent me:
The effect of lifetime warranties on service, spares, etc. revenues.
This was my biggest concern. It turns out to be a non-issue. Reading the press release, it seemed that their service and spares revenue would diminish over time. The lifetime warranty is only on the chamber, and it is only for so many pulses. Clearly, the warranty means we will get less revenue than we would have without the warranty, but it won't have that big an effect. The biggest reason service and spares decreased in Q1 from Q4 was than in the past the integrators (Nikon, ASML, etc.) carried the service and spares inventory. Now the end users do. There was a time lag as the integrators inventory was used up. BTW, the margins will be higher dealing diredctly with the end users.
What part of the market are they willing to concede on price? The 5000 series? Given that Cymer is the relative high-volume producer, you would think that they would be able to compete at the low end.
They really only see competition as the very low end. They are going to pick and choose where they want to fight this battle. It was clear from their presentation that they think (and I agree) that chipmakers need a complete package, including service and support that the chipmakers are willing to pay for. If a line goes down because of a bad laser (I think Cymer's up timne is 98%+) and it costs the fab $1mil/hr while it is down, who has the worldwide support infrastructure to get it fixed? Cymer. Consequently, they will get into the battle seletively, but the vast majoritry of the time it's total value pricing. See next question, too.
Akins mentioned on the last CC the possibility of a price war. What's his perception of the probability of that happening and its worst case impact on ASP, market share, and revenue.
Pascal Didier <SP?> answered this. He repeated the anwser above but also said that a price war can't happen without items of comparable value. Since Cymer's value added is so much higher, ie, service, R&D for future products, upgradability, etc., this is only low end and would have little impact on ASP's.
Does patent inventory afford any protection to competitors improving their models to the same level as Cymer's.
Yes, but then it takes a while to get resolved in the courts. Last line of defense.
Any consideration to using cash to broaden technological base through acquisitions?
Not really. Beyond DUV there's EUV. Won't rule it out.
Status of shareholder lawsuits
A judge denied the plaintiff's request for class certification for 293 individuals. There is currently a motion for 7 individuals to be certified as a class. Essentially, nothing happening.
Foreign currency hedged? Why $234k loss in Q1?
It is hedged, but some can't be avoided. This was the effect of Cymer, Japan's payable to Cymer, Inc. adjusted for the Yen difference as of period end.
In summary, I really was impressed with management. Our dominance is liekly to be maintained. The industry is about to explode, etc.
I will fill in any missing pieces from Scot's report, but I won't be back on SI until Monday.
Jay |
