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Technology Stocks : Teradyne -- Ignore unavailable to you. Want to Upgrade?

To: Jeffrey D who wrote (1045)	7/19/2000 8:45:04 PM
From: Maverick	Respond to of 1184

ML:inits BUY,tgt $110, 43 wins so far, order increases in 2H Investment Highlights: • Teradyne reported 2Q results of $0.76 vs. $0.60 Q/Q and $0.20 Y/Y. The results were above our $0.75 estimate and $0.74 consensus. Revenues were in-line, gross margins were slightly better than our estimate. • Orders were the second highest in the company’s history at $826 million. Orders declined from the blow-out levels in the previous quarter. Importantly, the outlook is for Order growth in the coming quarter on all product lines. • We are raising our estimates from $3.05 to $3.10 on 2000 and $3.95 to $4.00 on 2001 respectively. Our price target is $110. Fundamental Highlights: • Teradyne is the leading manufacturer of automatic test equipment (ATE) serving the electronics industry. The main product lines include semiconductor, circuit board, and telecom infrastructure test equipment, and software testing. • Teradyne is also a leading Electronics Contract Manufacturer with a highly differentiated, high margin business platform. Strong quarter and stronger outlook Teradyne reported second quarter results of $0.76 versus $0.60 last quarter and $0.20 a year ago. Results were above our estimate of $0.75 on higher gross margins of 47% versus our 46.3% estimate. Revenues were in-line at $759 million. Don’t be followed by the drop in orders The $826 million in orders overall dropped from $1024 the previous quarter. The drop was attributable to the Catalyst system on a chip tester line which had $125 million in orders in the last three days of the first quarter that were essentially pulled in from the second quarter. Catalyst is poised to snap back toward Q4/Q1 levels of orders based on customer forecasts in the third and fourth quarters. Otherwise orders would have been $900 and $950 million for the first and second quarters. In fact, Teradyne achieved record orders in 4 of 8 product lines in the second quarter. High end J973 logic testers, J750 low cost testers, software test, connectors and backplanes had record orders. Memory testers also had the highest level of orders in 2.5 year. Teradyne has visibility for order growth above the second quarter level in the third quarter with a positive fourth quarter outlook as well. Raising Estimates Although we just recently initiated coverage with fresh estimates and Teradyne came in only slightly above our forecast for the quarter, margins and revenues both appear to be trending higher than our model. Thus, we are raising estimates modestly from $3.05 to $3.10 for 2000 and from $2.95 to $4.00 for 2001. It is a calendar fiscal year. We believe these estimates could prove conservative over time as both more margin leverage and revenue upside occurs. Major design wins propelling Semi-Test share gains. In 1999, Teradyne saw design wins – basically competitions against other tester companies for the orders for testers for new semiconductor devices – jump from 22 to 77 wins. In 2000, Teradyne has already had 43 wins. Memory test demand is finally picking up for Teradyne after 2.5 years. The company had a major competitive win in the quarter and is beginning to see traditional memory test customers order again – a sure sign demand is strong. Non-Semi test businesses also picking up steam. Software test nearly doubled year over year and is now achieving an annual revenue run rate of over $80 million. The company has a large presence in telephone line testing for voice and data applications but orders have been weak. DSL related testing should provide order growth in the third quarter as worldwide service providers increasingly focus on improving access to high bandwidth capability. Connectors and backplanes, which includes contract manufacturing was particularly strong growing 24% Q/Q and is now approaching a $1 billion run rate. Strong balance sheet supports growth opportunities The company generated over $50 million in cash to reach $297 million. Inventory turns were stable at about 4.0x. DSOs dropped dramatically to 58 from 70 days. Investment Opinion Reiterate BUY and price target of $110. We believe that the order decline reflects the normal lumpiness associated with the large orders regularly placed in testers and that the 4 quarter moving average has always been a better way to track Teradyne’s progress. This average has increased steadily over the last 6 quarters and should continue in the second half. We believe the stock should regain a valuation in-line with Applied Materials and KLA-Tencor as the leader in their respective segments at 25-30x 2001 EPS estimates. We are initiating our price target at $110, based on our 2001 estimate of $4.00.

To: Jeffrey D who wrote (1045)	7/19/2000 8:59:32 PM
From: Maverick	Respond to of 1184

Teradyne Announces $6M Backlog for Celerity ADSL Loop Qualification Test System; $6M in Orders in First Month of Availability July 19, 2000 07:31 DEERFIELD, Ill.--(BUSINESS WIRE)--July 19, 2000--Teradyne, Inc. (NYSE: TER) today announced that it has a backlog of $6M from multiple customers for Celerity, a DSL test system that augments line record systems to enable accurate pre-qualification of copper loops for DSL services, since the June 5 launch of the product. Celerity accurately qualifies millions of lines in hours enabling Local Exchange Carriers (LEC's) to test every line exposed to DSL every month. Celerity enables LEC's to deploy more DSL sooner by increasing the pool of available DSL-ready lines and increasing the productivity of the provisioning process. Celerity also provides LEC's the capability to meet the quality and cycle time requirements of the FCC's recent ruling on line sharing, at reduced cost. "Celerity directly addresses the business issues of ADSL loop qualification and service assurance," said Wayne Lasson, general manager of Teradyne's Telecommunications Division. "The technology was proven in a major field trial and customers see the real value that Celerity has to offer for speeding up ADSL deployment." Today, using current records systems, service providers classify lines suitable for DSL services primarily by length. These systems generally conclude that short lines are more likely and longer lines less likely to support DSL. Based on this, Celerity can augment the value of record systems in three ways: 1. Find more good lines: through more accurate testing and the ability to determine the line's maximum DSL speed, Celerity reduces "false negatives" - long lines that, in reality, can support DSL with no additional conditioning work but were judged incapable by records systems. 2. Faster cycle time on lines that are uncertain: for a significant percentage of lines current record systems are unable to determine whether the line is qualified. Celerity reduces the work and cycle time associated with manual qualification for these medium length lines. 3. Fewer bad lines are provisioned: Celerity reduces "false positives" - shorter lines that were thought able to carry DSL but because the actual distance is too long or there are speed impairments present, the line will not support DSL. Trial results indicate that Celerity can increase good lines by 15% - 30% through reduction of false negatives and reduction in the number of lines deemed uncertain. The trial also demonstrated Celerity's ability to reduce false positives by approximately 15%. Celerity consists of a Test System Controller (TSC), and a number of central office-based Loop Diagnostic Units (LDU). The LDU executes specialized narrowband test techniques through the existing low frequency test bus in today's switches. The TSC contains expert system software and an array of cable and modem models. With this capability, Celerity can determine the presence of DSL speed impairments such as load coils or bridged taps, as well as determine the transmission speed of the line by telephone number. Celerity's distributed architecture enables the system to access thousands of lines simultaneously and thereby perform tests on millions of lines in hours. Celerity is a self-contained test system, delivering information that is immediately useable through standard OS interfaces to data warehouses. About Teradyne Broadband Test: Teradyne Telecommunications Division develops state-of-the-art broadband testing capabilities that support service provider's goals to sell and deploy more services sooner and improve the efficiency of qualification, provisioning, and customer care. Teradyne's seven years of Internet protocol testing experience enhances its 27 years experience in providing test systems that support voice customer care for over 110 million voice lines worldwide.