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

To: 10K a day who wrote (25645)	1/17/2002 10:43:13 AM
From: Robert Douglas	Read Replies (1) \| Respond to of 25960

Oh i think it's time to short the daylights out of it... WHEN MSDW tells you it's the best idea since rice pudding for GWB While I share your general sentiment about the recommendations of analysts, I don't think that's the case here. I've seen the report from Morgan Stanley and was impressed by its reasoning. Of course, the report gets most of its estimates from information provided by the company and you could argue that Cymer management is out to lunch. But I don't think so. In the report, the service and spares business is discussed. Estimates from Cymer have the total service business going from $94 million in 2001 to $758 million in 2006. This, of course, reflects the increase in the installed base of equipment using lasers and the utilization of the equipment which requires the service. If you take Cymer's current market share of 85% and apply it to this number, you get Cymer's revenues from service and spares at $644 million - well above its current TOTAL sales. The Morgan report puts the market at a more conservative $644 million and gives Cymer a 70% market share, yielding revenues of $451 million in 2006. Interestingly, the report states that Cymer earns "a better than corporate average gross margin on this .... business." This is something I have always speculated about and have never had definitive proof, but it makes sense that this business is higher margin than the rest. It follows then that Cymer's margins will increase as this cycle progresses. Also, the importance of service should not be ignored in the sale of the original machine. Cymer has, IMO, an incredible advantage in their support network throughout the world. This will be difficult and expensive for any of their competitors to duplicate in the future. I believe it was in the Needham Conference that they pointed out the average downtime was just hours because Cymer had technicians located nearby the various semiconductor fabs throughout the world. Of course, so much depends on the competition. Investors have fretted for years that Cymer had nowhere to go but down from their gaudy 80% market share. But apparently, Cymer's competitive position is actually getting stronger. And for reasons that I mentioned above, is possibly defendable in this area. So I ask you, if three years from now, Cymer has a dominant market share, growing sales, increasing margins and is becoming more of a "service story" than a new equipment story, where do you think the stock will sell? I've seen the way the market takes a shine to companies with the attributes that I just mentioned. It's very likely you would get a very generous valuation. Golden Age of DUV? Don't bet against it.