part 3:
Philip Lee, J.P. Morgan Chase - Analyst [56]
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Can you give an idea of the gross margin expansion once you flush through some
of the higher cost XLA inventory by the first half of 2004?
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Nancy Baker, Cymer - Senior VP and CFO [57]
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Well, at a $60 million breakeven target, that is when you would expect the
gross margins to be somewhere in the mid-30s. So items above guidance is when
you are really getting into the 35 to 40 percent gross margins and then you are
into a full blown ramp, so you are expecting improvements there.
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Philip Lee, J.P. Morgan Chase - Analyst [58]
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One more follow-up. When was the book-to-bill guidance for Q4?
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Pascal Didier, Cymer - President and COO [59]
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Right now we don't have a specific number. Just the fact that we are expecting
to be below 1.
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Nick Tishchenko, Fulcrum Global Partners - Analyst [62]
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Good afternoon. A couple of very short questions and then maybe a follow-on.
The first one relates to the lasers. What 248 millimeter lasers are used in mix
and match with your XLA 100 tool? I am talking about your customers' end users.
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Robert Akins, Cymer - Chairman and CEO [63]
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Yes. The most common mix and match would be the 7000 K or in some cases the
6010. You saw a pickup in the 2.5 kilohertz 6010 portion of our business in this
current quarter and Q3 as well. It would be those two models primarily.
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Nick Tishchenko, Fulcrum Global Partners - Analyst [64]
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The second question is a follow-on to John's question about your customer
(inaudible) with the options on the short-term deliveries. When we are talking
about three-month delivery times, where are the (inaudible) at Cymer, or they
are already sold to ASML?
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Pascal Didier, Cymer - President and COO [65]
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It is an interesting question. I think the real answer to that is probably 70
percent maybe already at ASML and 30 percent Cymer.
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Nick Tishchenko, Fulcrum Global Partners - Analyst [66]
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The last question relates to backlog. What is the share of the backlog that
will be delivered within, let us say, the first calendar quarter of 2004 in the
next two quarters?
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Pascal Didier, Cymer - President and COO [67]
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We have never -- it is something we have never talked about. It's very
difficult to do difficult to do because in an environment like this, with the
current visibility, we barely see one quarter ahead. So we usually don't give
projections on how we see the backlog being moved into revenue.
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Nick Tishchenko, Fulcrum Global Partners - Analyst [68]
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The reason why I am asking is ASML said that 80 percent of their backlog is
shippable within the next two quarters, the December quarter and the March
quarter of 2004. This is the only reason why I am asking you. You said, Pascal,
that you are working together with your direct customers, and this was my
assumption that you should follow the same pattern.
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Pascal Didier, Cymer - President and COO [69]
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I should follow the same pattern for a portion of my backlog because a portion
of the backlog is related ASML, but the other portion of the backlog is related
to chipmakers and the other two direct customers who have a different type of
pattern. So making the assumption that what we have in backlog for ASML, follow
the ASML model is a valued assumption, but we will not expand that model to the
other two direct customers who are chipmakers because each one of them has a
different pattern.
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Steven Pelayo, Morgan Stanley - Analyst [71]
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I guess I am trying to get an understanding of your bookings concentration this
quarter. Did it follow the same similar splits that you are showing on your
year-to-date revenue breakout by customer, or was it highly concentrated to one
lithography vendor?
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Pascal Didier, Cymer - President and COO [72]
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It was more concentrated into one lithography supplier.
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Steven Pelayo, Morgan Stanley - Analyst [73]
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The reason why I am asking, Pascal, is because on a bookings basis, ASML went
from roughly about 18 systems to over 60 or so if you include their use systems,
so an increase of, let's call it, 40 systems or so. Yet your bookings only went
up by about 10 million. I am trying to figure out what is the difference there.
Are we talking two-thirds of those bookings were ASML only type of orders? Is
there some kind of spread maybe there? I am trying to dig a little deeper in
that.
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Pascal Didier, Cymer - President and COO [74]
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You have to remember that more likely a number of ASML bookings are already
served by ASML inventory, which does not translate largely to Cymer bookings,
and making the assumptions that Q3 was heavily loaded to one of our direct
customers is also a valued assumption, so you have a combination of the two.
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Steven Pelayo, Morgan Stanley - Analyst [75]
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Okay. I guess I need a quick understanding of your backlog and trying to
calculate the book-to-bill that is in your press release. I guess your backlog
went up by -- I forget the exact amount here -- but it did not really equate for
me. What? About 9 million or so, yet if you think about it your bookings were
only 3 million greater than your revenues or so, so I am trying to figure out
how does that backlog end up increasing by that much?
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Nancy Baker, Cymer - Senior VP and CFO [76]
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You have to remember that we do not include service revenues or R&D revenues in
our book-to-bill ratios. We only refer to light sources, consumables, spares and
upgrades because that is also the only items that are in our backlog as well.
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Steven Pelayo, Morgan Stanley - Analyst [77]
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Okay. So the book-to-bill is essentially a 64 and 67.5 million divided by
revenues minus the service -- total revenues minus service. Correct?
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Nancy Baker, Cymer - Senior VP and CFO [78]
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Total revenue minus service and R&D, yes.
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Steven Pelayo, Morgan Stanley - Analyst [79]
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Last question was I noticed on the slide that you had in your presentation that
it looks like some of the regional number of pulses data show a down tick in
China and Korea over the last month or two or so. Can you shed some light on
that? Is it just the fact that there is much more capacity to put in, or we
actually seeing shots on an organic basis falloff?
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Pascal Didier, Cymer - President and COO [80]
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No. There is some volatility (inaudible) there. You have to remember that, for
example, specifically with Korea, over the last couple of months, Korea went
through what you call a load switch -- changing some of their process
(inaudible), and as such, their shutdown goes down for a few weeks and then it
goes back up again.
China, what I would like to do with the way the wafer fabs are being used,
(inaudible) MIC. So there is some volatility in Korea and China because of this
installed base and the way the wafer fabs are on. In Korea, you see that. In
fact, if you go back in time, you see that a few times because every time the
two major Korean customers go through a technology shift, for example, going
from 130 to 120 or 120 to 100, you see it dip and then it goes back up again. So
it is mainly related to that. |
