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Technology Stocks : Newport Corp.NEWP...lasers..semi..mfg...equipment.. -- Ignore unavailable to you. Want to Upgrade?

To: pass pass who wrote (153)	4/19/2001 5:53:25 PM
From: Sully-	Respond to of 174

MotleyFool.com - Fool News Newport Soars By Richard McCaffery Fiber optics and semiconductor equipment company Newport (Nasdaq: NEWP - news) reported strong first- quarter results in a weak environment yesterday, and the company's shares got a Nasdaq-style bounce as related companies such as semiconductor equipment maker Applied Materials (AMAT) stormed higher on hopes the worst of the industry downturn is over. Newport's shares jumped almost 20% yesterday and another 10% today after the company reported strong growth in sales and net income last night. First-quarter profits, excluding non-recurring charges from acquisitions, soared 204% to $15.3 million, up from $5 million a year ago. Sales jumped 104% to $106.7 million, up from $52.4 million a year ago. Despite the strong results and rising stock price, investors who bought shares of Newport around its 52-week high of $192 last fall are still feeling pain. The company's shares closed today at $42.20. But investors can take solace in the fact that Newport isn't an overleveraged telecom start-up, a bloated legacy carrier, or a goofy idea dreamed up by CMGI (Nasdaq: CMGI - news). No, Newport is a 30-year-old company that sells testing, measurement, and automation equipment to a wide array of fiber optic and semiconductor companies, as well as a stable of university laboratories. The stock caught fire in the last two years as the fiber optics market accelerated, particularly once Newport gained traction in the nascent automation market. Newport wants to become the Applied Materials of the optics industry, providing integrated assembly, automation, and assembly equipment to components manufacturers. The Applied Materials parallel is what propelled the stock to astronomical heights, and investors should be very careful with their assumptions. Newport has a long way to go before the comparison is valid. Still, management has done a good job proving that the optics industry -- which is really still a cottage business in many ways -- can be scaled. Newport's LaserWeld and AutoAlign products are the heart of its strategy and the products appear to be selling, even in a tough environment. Part of the reason for this, of course, is that Newport's products are aimed at cutting costs for customers by helping them improve yields and cost-per-unit. Fiber optics components companies feeling the crunch are scaling back expansion plans and focusing on costs. This works well for Newport, but it doesn't mean the company is immune from cycles or downtrends. The book-to-bill ratio of its fiber optics division dropped to 0.8 in the first quarter from 1.6 in the third quarter of last year. (A book-to-bill of above 1 basically means the company is receiving more orders than it ships.) It has clearly fallen off, and the company is now in the position of shipping more orders than it receives. Such is life in a cyclical business. Still, when I wrote about the company in our latest Industry Focus I wanted to see growing sales of the company's automation products, and this appears to be happening. On the conference call the company said it will roll out its next generation LaserWeld product in May and it expects sales to accelerate through the year, moving into the double-digit range. So where does Newport stand? Newport's business focus hasn't changed and the company continues to make progress in its automation business. Manufacturers must improve yields and efficiency to become productive. The long-term trend in the components industry is up, but no one knows what will happen in the short term. There are still many privately funded start up fiber optics companies buying equipment. There will be a shakeout among these players, and that could affect sales. Newport and companies of its kind are highly risky and should be approached by investors with a long time horizon and a keen interest in following a fiber optics company. Have a great day. Richard McCaffery invented Post-Its. His stock holdings can be viewed online, as can the Fool's disclosure policy. For more things Foolish, go to the The Motley Fool's complete site! We aim to inform, educate and help you make good money, Fool. Also, check out the FoolMart, the place to shop for Foolish investing tools. Become a Fool for Motley Fool stock features, updates, contests, and product discounts! biz.yahoo.com Ö¿Ö