Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Kulicke and Soffa -- Ignore unavailable to you. Want to Upgrade?

To: Carmine Cammarosano who wrote (2508)	1/23/1998 1:18:00 PM
From: Darin	Read Replies (2) \| Respond to of 5482

To All, Lehman's Bros report on KLIC earnings, note the FY98 earnings estimate reduced somewhat, but not slashed. Headline: Kulicke & Soffa: 1Q EPS Above Expectations; Estimate Lowered Author: Edward C. White, Jr., CFA 1(212)526-4744 Rating: 3 Company: KLIC Country: EPS CUS Industry: SEMICO Ticker : KLIC Rank(Prev): 3-Neutral Rank(Curr): 3-Neutral Price : $19 1/4 52wk Range: $58-16 Price Target: $20 Today's Date : 01/22/98 @ 2:28 P.M. Fiscal Year : SEP ------------------------------------------------------------------------------ EPS 1997 1998 1999 2000 QTR. Actual Prev. Curr. Prev. Curr. Prev. Curr. 1st: 0.02A 0.22E 0.29A 0.57E 0.57E - -E - -E 2nd: 0.46A 0.39E 0.33E 0.58E 0.58E - -E - -E 3rd: 0.62A 0.46E 0.42E 0.60E 0.60E - -E - -E 4th: 0.63A 0.53E 0.51E 0.65E 0.65E - -E - -E ------------------------------------------------------------------------------ Year:$ 1.73A $ 1.60E $ 1.55E $ 2.40E $ 2.40E $ - -E $ - -E Street Est.: $ 1.84E $ 1.80E $ 2.58E $ 2.60E $ - -E $ - -E ------------------------------------------------------------------------------ Price (As of 1/21): $19 7/8 Revenue (1998): 513.1 Mil. Return On Equity (98): 11.3% Proj. 5yr EPS Grth: 14.0 % Shares Outstanding: 23.7 Mil. Dividend Yield: Nil Mkt Capitalization: 471.04 Mil. P/E 1998; 1999 : 12.8 X; 8.3 X Current Book Value: $12.60 /sh Convertible: YES Debt-to-Capital: 0% Disclosure(s): C, A ------------------------------------------------------------------------------ * Kulicke & Soffa reported 1Q EPS of $0.29, above our recently revised estimate of $0.22. But revenues are likely to be sequentially flat in 2Q, and we have reduced our 2Q estimate to $0.33, and our estimate for FY98 to $1.55. * The pace of bookings activity suggests that business remains reasonably healthy. But orders in South Korea have been postponed, and the general trend to sub $1000 PC's is affecting ball bonder demand from chip set manufacturers. * Expense control and the move to the new, higher gross margin 8000 family wire bonders should help margins. Prices on the 8000 are 15-20% above 1488 prices, as expected. There is a strong focus on gross margin improvement. * A number of important new products are under development, including the model 8070 for bonding chips in micro BGA packages, the 8090 for large area bonding, and the higher throughput (and higher margin) 8020 Plus. * Margin initiatives should help reduce near-term EPS risk, but it is still difficult to predict the impact that events in Asia and in the personal computer market will have on revenues. We maintain our 3 (Neutral) rating. ------------------------------------------------------------------------------ BUSINESS DESCRIPTION: K&S is the worldwide leader in semiconductor assembly equipment, and a leader in consumable materials and chip packaging technology. ------------------------------------------------------------------------------ Highlights Solid bookings and backlog. Orders totaled $136 million, for a book-to-bill ratio of 1.10 for the quarter. The company ended the quarter with a backlog of $131 million, up from $93 million at the end of the first quarter. This is a good booking picture, considering that South Korean companies postponed much of their order activity with the company. Positive influences on margins. The greater the mix of 8000 products, the higher the overall gross margin. Not only does the 8000 family carry an inherently higher gross margin structure, but there is also more price competition on older generation bonders. Kulicke & Soffa's overall view is that with over 50% of the wire bonder market, its gross margin should be higher than it is at present. To that end, the company is likely to focus on a number of initiatives aimed at margin improvement over time. The sub $1000 PC. All personal computers require logic chip sets to support their central microprocessors. The chip sets used in high-end PC's tend to be very sophisticated, and they are placed in relatively elaborate packages requiring a large number of wire bonds. Low cost PC's can use simpler chip sets placed in simpler packages with fewer wire bonds. Therefore, manufacturers of PC chip sets do not need as much incremental additional wire bonder capacity as they did before. This probably is not a long-term negative phenomenon, but it is noticeable to Kulicke & Soffa, and it is among the reasons that the company does not project aggressive 2Q wire bonder unit growth. Flip Chip Technologies. The Flip Chip Technologies joint venture's achievement of break-even results is six months further away than expected (i.e., it should occur by the end of calendar 1998). Semiconductor manufacturers are finding that they can do more complex wire bonding than they through was possible, and this is delaying the move to flip chip. We still see flip chip as an important technology for the company in the future. Future opportunities Among the possible new initiatives for Kulicke & Soffa are the following: Entry into the die bonder market, possibly by acquisition. Development or acquisition of emerging packaging/materials technologies. Addition of product lines addressing wire bonder market niches. Entry into board level packaging and related technologies.