I do not normally do this but as a courtesy to those that inquired, I am reprinting the opening historical perspective that appeared in Today's RadarView. We highlighted this in the first 4 pages of the newsletter prior to discussing anything else. Radarview subscribers receive this type of infomsation on an ongoing basis on a myriad of stock within our universe. As many of the readers are well aware, these analysis often appear days and even weeks before the Wall Street pundits and the media discuss these topics and realize the same thing.
So while the reprint is from today's issue, readers have been focused on this stock since it was a bargain under $47 just a few days ago. As everyone here has been doing, profits are rolling in for all of our readers.
March 22, 12:25 PM ET - Cymer CFO Says Revenue Will Rise as Much as 60% This Year
Cymer Inc. could see sales will rise as much as 60 percent this year because of higher shipments, especially overseas, according the the company's chief financial officer said. CFO William Angus said sales would be "extremely strong" in the second half, Sales were $220.5 million last year. Net income was $8.6 million or 29 cents a sham. Cymer shares have more than doubled in the past year. Cymer is the largest supplier of excimer lasers used in making semiconductor exposure lithography equipment. The lasers produce light at precise wavelengths and transfer chip designs onto silicon wafers. As chipmakers shrink the size of circuits on semiconductors, they need lasers capable of producing higher resolution images. "There is overall strength in the market and our market share, with our Japanese customers coming in higher than anticipated," ASM Lithography Holding NV of the Netherlands, one of Cymer's top customers, also will have a good year, Angus said. Business outside of the U.S. accounts for the majority of Cymer's sales. Cymer will ship 500 lasers this year, compared with about 320 last year.
Cymer represents one of our core holdings that we expect make considerable profits on over the next quarters. We also are looking for the next surge in lithography orders to kick in which should help both ASML and CYMI over the next year or so. This is one good reason why we are watching very closely for an entry into ASML, which we are very close to doing.
We very rarely go back very far in our archives to reprint old information but we are going to make an exception in this case since it does illustrate a point we made yesterday about the feast-famine situation that could affect the equipment suppliers as demand for equipment outstrips the ability to supply the equipment and as capacity gets tighter at these companies. From the looks of things, there may still be plenty of capacity upside at Cymer, if nothing has fundamentally changed with its facilities other than personnel.
WARNING: The following information is old and dates back to 1998, just prior to and during the downturn in the semiconductor industry. It does not reflect the current market conditions
May 1998 - Notes From the Annual Meeting of Stockholders Provided to me
For laser revenues I wrote down, "Over $200M in '98 and $800M in 2001.Estimate for '97 was $200M and Cymer hit $203M. Presently Nikon, Canon, ASML, and SVGL all incorporate Cymer's lasers. 1997 saw 213% revenue growth and 300% net income increase. Manufacturing was doubled. The Company can now produce 1000 lasers per year, "more than the industry needs." Ramped from 15 test bays to 45. Seiko is building 10 more. Employees expanded from 336 to 809.
* Only proven DUV laser technology. Have greater than 85% of market share.
* Only full-scale manufacturing capability. Presently has an 18-month lead on competition, which could expand to 30 months.
* Only global service and support team.
*Has achieved critical mass of scientific talent. Cymer has world's finest excimer laser scientists and engineers and continues to recruit. No problem with turnover. Joining a winning team is satisfying.
* More than doubled installed base last year.
* Chipmakers who ultimately use Cymer products include every maker in the US and nearly every maker worldwide.
Industry conditions:
* DRAM price/supply imbalance
* Regional economic challenges: Japan, Korea, SE Asia, North America --- Japan is the biggest.
* Lithography is hot area: no matter what, you must have this if you plan to compete in 0.18u or below.
* Revenue flat, but no downturn seen for next 2 Qs.
* More companies are delaying transition to 300mm and using die size instead. This helps Cymer.
* Stepper to scanner transition, tool of choice with 50% - 80% of tools in '99 being scanners.
Steps to Meeting Goals:
1 - Continue aggressive R&D to create new products. Spending more than ever before.
* accelerate time to market
* expand product line
* enhance KrF
* next generation KrF development
* next-next generation ArF development
* 5010 Series - first shipped in Q1 '98, ahead of schedule
* Orion KrF excimer laser, will ship Q3 '98
2 - Enhance global service-support network.
* Japan - taking new facility near Tokyo
* trainers, tech support, spare parts
* rotation program for personnel both in San Diego and Japan
* increased locations from 5 to 19
Comments on Financials:
Presently has $98 million in cash. No additional financing required at present time. They want to convert subordinated debt in 2000. There are substantial growth opportunities. Historically they are cautious. Eventually there will be additional opportunities. To remain the leader, money alone isn't enough. Must have world-class talent, which Cymer has.
Overall, the semi-conductor industry is expected to contract over the next couple quarters while Cymer is estimating they'll remain flat, with return to growth in '99. Japan remains a challenge and no one knows when that'll change. Anyone who wants to stay competitive will need Cymer's products. The company is on target and ready for the ramp when it comes. Page 7 of the annual report states, "Analysts expect the DUV market to grow twice as fast as the overall lithography market during the next several years. Cymer is prepared to capitalize on this significant growth potential through new product innovations, growing global support infrastructure and increased manufacturing capacity."
Cymer's headquarters is located in a scientific park on the west side of Rancho Bernardo, a community about 20 minutes north of San Diego on Hwy 15. Situated on a hillside, the campus is on several levels, with meandering sidewalks and stairways connecting the different buildings. Inside the lower building, the decor is white with blue trim, with highly polished floors so clean you could eat off them. The management was kind enough to offer tours after the formal meeting. Windows along the interior hallway allowed us to view the clean rooms where lasers were being fabricated by automated workstations. About 70 - 80% of the assembly is done off site. They indicated they would like to raise that even higher. The de-bugging cycle had improved from 35 days to 14. One look at the growth projections beyond 2000, and it's clear this is one company you don't want to miss.
September 11, 1998 - Cymer Announces Reduction In Workforce; Expects Continued Industry Downturn To Impact Revenues
PRNewswire - Cymer, Inc. (CYMI), announced today that it will reduce its global workforce by approximately 12 percent, as part of the Company's restructuring plan to address a forecasted reduction in business volume due to the continued downturn in the semiconductor industry. In addition, the Company currently expects total revenues for the third quarter to be approximately 10 to 15 percent lower than revenues reported for the second quarter. However, due to ongoing cost savings measures, it is currently anticipated that earnings for the third quarter will approximate current Wall Street expectations. A total of 98 positions will be eliminated, the majority of which will be at the company's San Diego headquarters, resulting in a worldwide headcount of 713. Employees are being notified today. Additionally, senior executives' salaries will be reduced by 10 percent.
"We are currently in a highly volatile, rapidly changing market environment that continues to be affected by capacity issues in the semiconductor industry as well as the economic situations in Japan, Asia and the rest of the world,' said Robert Akins, president and chief executive officer of Cymer. "Over the past several months, we have instituted a number of cost-reduction programs. However, in response to the prolonged downturn in the industry, it has become necessary to restructure for an even lower business volume in the near term. Our goal with this restructuring is to reduce our overhead structure and improve our efficiencies, while continuing to make sound investments in the resources that can provide for the long-term competitiveness and growth of Cymer.'
SUMMARY: we presented this historical information to provide a flavor of where Cymer was positioned prior to the industry downturn and prior to the 300mm programs being shelved and prior to the dramatic slow down in implementing advanced technologies. As we come to the 2-year mark and the upcoming annual meeting, it will be interesting to compare these two-year old comments with the new corporate view of their business. From the information above, we will assume that Cymer has the capacity to meet any upside to the 500 laser estimate for 2000 and could easily double that, if need be. We also believe that this 2-year slip caused by the downturn might translate to some very profitable quarters well into 2001 and beyond. We do know that during the past 2 years, Cymer has made significant advances in its laser technology and now have much more reliable systems with improved uptime and resolution capabilities. Competition is still nothing to be concerned with still. And finally, based on the advances made in their product line, we would estimate that DUV would be the dominant exposure technology for at least the next 5 years and most likely the next decade. Not even Wall Street goes that far into the future for assigning market valuation, even though, in this case, Cymer deserves a premium for the projected stability over the next 5-10 years as a dominant supplier.
We see no reason why Cymer is not back on track to make significant strides over the next few quarters as the industry downturn create a larger demand for their products now that we are in a recovery phase, we have moved from a dominant 0.35u technology (prior to the downturn) and are at least 2 generations down the device technology curve with 0.18u ramping up. And finally, Cymer has yet to cash in on the impending 300mm transition that should be very profitable for all of the equipment manufacturers. |
