To: Kirk © who wrote (8171 ) 1/23/2003 1:23:01 PM From: Alastair McIntosh Respond to FWIW CSFB states the that current bonder uptick is being driven by a better yield curve producing more “good die” from existing 0.13 capacity.F1Q rev and bookings higher. KLIC reported F1Q revenue and operating EPS of $111 mn and $(0.31); revenue declined 9% vs. F4Q but was above our estimates of $100 mn and $(0.43), guidance of $95-105 mn, and street at $100 mn and $(0.44). Leveraged to ASE Test, equipment sales (40% F1Q rev.) held up better than expected, declining 2% seq to $45 mn vs. our estimate of $34 mn. Pricing still an issue on Maxum, but fixed asset reductions drove 170bp seq. higher GM of 24.5%. We expected an upward bias to our F1Q bookings estimate of $100 mn; KLIC posted bookings of $117 mn, representing 6% seq. growth.Bonder sales helping business. KLIC expects F2Q revenue of $120-130 mn, implying 8-17% seq. growth, with B:B of >=1.0. We believe current bonder uptick is being driven by a better yield curve producing more “good die” from existing 0.13 capacity. While encouraged by stabilizing trends at KLIC, we believe end demand is still the key issue, and will be needed to sustain positive order momentum past the Mar Q. Importantly, while KLIC is often used as a leading indicator for SCE, upside should not be viewed as a clear path for growth for the rest of the industry. Unit plays should continue to outperform capacity plays until utilization rates in the wafer fabs increase and pricing environment improves - an unlikely event in 1H03.New estimates. KLIC is doing a good job controlling what it can. Better cost leverage is evident with $9 mn in recurring opex removed over the past 2 qtrs. Based on company’s higher revenue outlook and solid cost discipline, we are increasing our F03 estimates of $450 mn and $(1.25) to $512 mn and $(0.65); Street consensus is $(1.12). Breakeven is pulled-in 1-qtr to F4Q at $140 mn rev., though could be optimistic given difficult pricing climate. F04 estimates are introduced at $651 mn and $0.56.Discounted valuation but real profitability issues linger. At 1.0 times FTM sales stock trades at a significant discount to SCE average of 2.4 times, allowing stock could benefit near term from a more optimistic outlook in F2Q02. We remain cautious longer term with pricing difficulties likely to dampen margin and profitability leverage and with cash expected to drift lower in the near term. PT raised from $5 to $6 reflecting mildly better outlook and visibility though lack of earnings should limit upside.
