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

To: FJB who wrote (13818)	1/31/1998 7:08:00 PM
From: Tulvio Durand	Read Replies (1) \| Respond to of 25960

do you know if service and spares revenue carries a greater margin than laser unit sales? Angus answered this question in the affirmative during Q/A part of CC. From my notes (in answer to Hodess) Angus stated "... spares and service will have a positive impact on margins". Tulvio

To: FJB who wrote (13818)	1/31/1998 8:21:00 PM
From: Mr. Aloha	Respond to of 25960

I believe they said that service/parts would increase overall margins. I believe service/parts will be as lucrative to Cymer as it is to an automobile dealership :-) In the last report they said that profit margins would go up but at the same time they'd be in a higher tax bracket. Now things have changed and new products mean lower profit margins but pushouts mean less taxes :-) soooo...... ?? Aloha

To: FJB who wrote (13818)	2/1/1998 6:43:00 AM
From: Lex Luther	Read Replies (2) \| Respond to of 25960

Bob, In regards to your question on service and spares, they are DEFINITELY high margin opportunities for Cymer going forward. I work for a semiconductor equipment manufacturer as a regional field service manager and I am speaking from experience when I say that spares ARE marked up anywhere from 100% to 200% or more depending on the part! It is almost like having a license to steal, but you don't have to believe me just go read AMAT's or NVLS's 10k and you'll see what I'm talking about> I would like to know if there are any semiconductor photo/process engineers or photo/equipment engineers that have CYMI DUV lasers in their steppers and if they could tell us what type of consumables the 5000 uses year to year. That would give us a starting point to estimate yearly spares sales based on the number of units in the field. It would be safe to say that by the year 2000 CYMI will have approx. 2000 lasers out in the field give or take what the competition manages to sneak in. I wouldn't be a bit suprised if you see their service and spares revenue be in excess of 25% of sales. Now I agree this may be wishful thinking on my part but the pace at which CYMI ramped up their support infrastructure would point to that type of growth. Also judging from the startup and integration time (which was posted in the conference call) once these lasers get in the field, I would say it is safe to assume that these laser systems are not of the plug and play variety, unlike the older I-line technology.This would also indicate that it was necessary to have a very highly skilled and trained group of field service engineers which CYMI is developing as we speak. By the way, their billable service charge is probably close to $200 per hour, so go work the numbers. Actually, the potential revenue and PROFIT growth from service and spares is enormous, and it definitely warrants further investigation so that we can educate all those "genuis" analyst who really haven't got a clue when it comes to this type of scenario. I'll get off my soup box for now but $3 to $4 EPS in 2000 is not out of the question. Is this stock undervalued or what? We need more facts so we can further evaluate this aspect of their growth so all you photo- process and equipment engineers start typing. Take care.

To: FJB who wrote (13818)	2/1/1998 7:52:00 AM
From: Yakov Lurye	Read Replies (1) \| Respond to of 25960

RE: <<units sold by category in 1998>> To make any predictions, one needs to understand the status of 5010/Orion programs. Information from the CC transcript is vague - we don't know whether the "integrators" (I like thisterm - picked it from Akins) had been already working with prototypes, or whether 5010/Orion may be quickly incorporated into current stepper/scanner models. I believe the A-team when they tell they have limited visibility beyond Q1. Asia is not the only factor - if 5010 is significantly better than 5000 (rather than a complementary product), and if it can be worked into current stepper/scanner models, demand for series 5000 is bound to decline. This suggests that current inventory levels of old 5000 laser at "integrators" premises are too high even if Koreans get cash, but it is not immediately clear what strategy will be used to work this inventory down. No wonder CYMER site has an ad for OR specialist whose task will be to build forecast models. Nevertheless, I would venture a couple of guesses, although of pretty general nature: 1) In itself, introduction of 5010/Orion series may not generate an increase in steppers/scanners sales (although one could argue that better equipment characteristics may stimulate the demand) . The corollary is that introduction of new products may not lead to increase in the total number of lasers produced . Integrators will have to build up 5010/Orion inventories, but because of cross-elasticity and high level of 5000 inventory acknowledged during CC, new 5010 orders are likely to be accompanied by decreases in series 5000 orders. 2) For 1998, fraction of new lasers in the total output will be relatively small. There is a remote possibility that after 2Q introduction of 5010, integrators will be able to work it into their current models real fast (e.g., start shipping steppers for trials by 4Q98), and start ordering mostly 5010 instead 5000 in this quarter, but I doubt that such rapid introduction of a fairly new product is warranted . If assumptions 1) and 2) are correct, the increase in revenues for 1998 attributable to new product lines will be small. As an example, let us assume that new lasers have 20% higher ASP and account for 25% of the 1998 output - the last number is probably too high . The incremental revenue from new models will be about 5%. In 1998 any incremental revenue from new products will be definitely within the range of forecast errors for the total laser demand. Of course, even a small % increase in revenues could translate into much higher increase in earnings - new products should have higher margins. This bodes great for 1999. In addition, new products help CYMER to protect the market share . As for 1998, the effect of higher margins for new products will be dampened by increased R&D expenses (these are likely to continue at least into 3Q), ramp-up inefficiencies, trials support, inevitable design fixes, software debugging, etc. I can't extrapolate R&D expenses; quality improvement program for series 5000 did cost about $1.5M per quarter. Some of these expenses could be (partially) offset already in 98: a conservative forecast of 460 lasers, 10% new lasers, 20% higher ASPs (530k vs. 440k) will result in incremental cash flow of 46*90k = $4.1M. Returning to 1998 laser demand forecasts: At the moment, laser sales forecast for 1Q98 (10-15% below 4Q97) is pretty close to 1/4 of projected stepper sales in 1998 (about 460 according to current forecasts). So far, DUV manufacturers seem to be maintaining current inventory levels. If they continue this policy, total number of lasers ordered in 98 will be equal to 98 DUV stepper installations (about 460). If the demand picks up, CYMER is likely to get more orders; as discussed above, as the year progresses, we are likely to see the increasing share of orders for new, more expensive lasers . My uneducated guess is that Deanha's number is based on 460 lasers and high level of expenses suggested for Q1continuing through the year. I think he wants to be conservative and discounts any additional revenues from sales of new lasers. Y.