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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (24986)	6/22/2000 4:24:00 PM
From: Nevin S.	Read Replies (2) \| Respond to of 25960

Robert, re: why doesn't CYMI raise prices to increase net margin? I'll venture a guess here that they would prefer to increase their net through higher sales volume which would create the operating efficiencies to boost their net margin. In addition, I think their net margin is impacted to some degree by R&D spending, which keeps them ahead of the pack and will ultimately ensure their future. Raising prices now may give competitors a chance to get a foot in the door and steal market share, and, ultimately future business. If Cymer can keep their customers loyal, they will continue to choose Cymer lasers over Brand X. This also brings up the topic of price elasticity. Classic price theory looks only at maximizing revenues based on pricing. However, at some point along the price curve, Cymer will maximize net profits not gross revenue by selling more lasers, thus, operating at a more efficient rate of production. I'm sure they have analyzed this issue to death when pricing their product. All this aside, I think they are better off pushing market share today to build a base of loyal customers. Like Japanese auto makers and consumer electronics companies, they saw that at least initially, it was more important to build brand identity and gain market share, than it was to maximize profitability. Some companies have done this better than other e.g. Sony and Toyota. Companies like Zenith and American Motors are no longer relevant today because of this strategy. Obviously Cymer will have to concede some amount of market share going forward, but, I'd hate to see them risk their future by trying to push pricing at this stage of the industry. Keep in mind, it has been less than two years since semi fabs have shifted a significant amount of production to DUV lasers versus light bulbs. In a side note, I think it was hugely significant that Hodess recognized the fact that even in a zero growth environment for semiconductor capacity, Cymer will still see decent demand based on upgrades in process technology. P.S. I would like to see a copy of the full report if possible and someone on the YooHoo board mentioned that the latest issue of Technology Investor has a favorable write up on our beloved Cymer.

To: Robert Douglas who wrote (24986)	6/22/2000 9:14:00 PM
From: Zeev Hed	Respond to of 25960

Robwert, it is difficult to add to Nevin excellent argument on pricing, so just another little tid bit. In business you often optimize pricing via the "umbrela effect", high enough to provide adequate profits and cash flow, low enough not to create an incentive for competitors to enter your field. Cymer has invested in the last few years not just in R&D, but also in a field service forces, this will bring revenues in the future, but right now, it is an additional fixed costs. As volume increases, you should expect the margins to increase (and thus profits climb more rapidly) because those fixed costs will be distributed over larger sales. This is actually a rare industry were price increases are common, most other Cap Ex sectors often suffer from very thin margins. Still bullish, despite today's market swoon down. Just pray that the Dow hold 10300 in the next few days, if it fails that point (and we are too close for comfort), this chicken is running for the hills. Zeev