The News From ETN Confirms that things are BAD in the SemiEquip Business:
Eaton Corporation Release On 1998
Earnings Expectations Business Editors
CLEVELAND--(BUSINESS WIRE)--June 24,
1998--Eaton Corporation announced
today that, because of the severe and
prolonged downturn in its semiconductor
capital equipment business, it was no
longer confident that the company's 1998
earnings would exceed 1997's record
results. Despite this, the company said
that it expected results for 1998 to be
among the best in the company's history.
Stephen R. Hardis, Eaton's Chairman and
Chief Executive Officer, said "When Eaton
released its record 1997 financial results
we stated that, unless the renewed
weakness in the semiconductor
equipment industry proved far more
severe than we or other industry
participants expected, Eaton could look
forward to another record year in 1998.
Unfortunately, the industry downturn has
been much deeper and more prolonged
than anticipated. Today, industry orders
are fully one third lower than six months
ago, equal to the lowest levels in the past
half decade, with no sign of an imminent
upturn in sight. This renewed collapse is
having a severe impact on the
performance of Eaton's Semiconductor
Equipment business, and upon Eaton's
consolidated corporate results." Hardis
emphasized that the performance and
outlook for the remainder of Eaton's
businesses remains intact. Said Hardis,
"Truck Components, Commercial and
Industrial Components, Automotive
Components, and Hydraulics all remain on
track with our expectations for a record
1998. We want to be clear that the robust
performance of Eaton's other operations
should not be obscured by the difficulties
in one. However, at this point we are no
longer comfortable that the consolidated
performance of these businesses can
overcome the combined impact on 1998
earnings of the severe downturn in
Semiconductor Equipment and the $1.3
billion of strategic divestitures we've
made over the past year." Hardis stated
that, based on current orders and activity
levels, 1998 sales of its Semiconductor
Equipment Segment were expected to be
about $330 million, 27 percent below 1997
results. The segment is currently
expected to suffer an operating loss of
about $40 to $45 million this year,
compared to operating profits of $30
million in 1997. Said Hardis, "We are
addressing these very difficult operating
conditions in an aggressive but controlled
manner. To ensure that resources are
appropriately sized for current market
conditions, Eaton Semiconductor today
announced that it was reducing its
workforce by an additional 200. Total
headcount this year is now down by
about 600, or 24 percent, from year-end
1997, with expected annualized savings of
about $60 million. We have also reduced
1998 capital spending by nearly 50
percent from planned levels, and are
reviewing all product programs with
respect to timing and criticality."
"However, we must sustain our
commitment to critical new product
developments if we are going to emerge
from this extended downturn with the
best in class, leading products that will
enable Eaton to take disproportionate
advantage of the next buying cycle. We
will not give in to the temptation to meet
short-term earnings expectations at the
expense of long-term market leadership. It
is one of the strengths of Eaton's
multi-business strategy that we can
sustain our commitment to the business
even in the most difficult times. In
Semiconductor Equipment, as with all of
Eaton's businesses, we are playing for a
long term, global win." Eaton Corporation
is a global manufacturer of highly
engineered products that serve industrial,
vehicle, construction, commercial and
semiconductor markets. Principal
products include electrical power
distribution and control equipment, truck
drivetrain systems, engine components,
hydraulic products, ion implanters and a
wide variety of controls. Headquartered in
Cleveland, the company has 49,000
employees and 143 manufacturing sites in
26 countries around the world. Sales for
1997 were $7.6 billion. The Internet
address for Eaton is:
eaton.com Statements in this
news release concerning 1998 earnings
are forward-looking statements and thus
should be used with caution. They are
subject to various risks and uncertainties,
many of which are outside the control of
the Company. Important factors which
could cause actual results to differ
materially from those in the
forward-looking statements include the
market for semiconductor capital
manufacturing equipment, the Company's
ability to align its cost structure with
prevailing market conditions, the length
and severity of the Asian financial crisis,
and the duration of the UAW strike at
General Motors. The competitive,
economic and technological factors
identified in the Company's filings with
the Securities and Exchange Commission
could have a similar effect. --30--djl/clv*
CONTACT: Eaton Corporation Renald M.
Romain, 216/523-4736 KEYWORD: OHIO
WISCONSIN INDUSTRY KEYWORD:
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Business Wire - June 24, 1998 08:32
I think the recent uptick in AMAT's price is a "false rally." When the bad news on the quarter hits, the stock will trade back down. The issue then is whether this will be a true buying opportunity, or a chance to buy and watch things move sideways or perhaps further down. In any event, long term investors will be handsomely rewarded. I submit that it is still too early to be taking a position in AMAT, KLAC, NVLS, etc. |
