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

To: orkrious who wrote (547)	9/22/1998 7:24:00 PM
From: orkrious	Read Replies (1) \| Respond to of 582

MSDW part 4 Restructuring -On September 11th, Cymer announced a 12% workforce reduction. This reduction was executed with the expectation of sizing the business at or close to a breakeven level in the low-to-mid $40 million quarterly revenue run rate range. A 12% reduction is better than most equipment suppliers that eliminated about 25% of their staffs to achieve a break even run rate. -Most of the people Cymer laid off were in manufacturing and administration. No R&D personnel were laid off and very few field service representatives were laid off. Competitive Threat -On September 10th, ASM Lithography (ASML) issued a press release introducing the company's first 193nm ArF laser-based photolithography system called the PAS 5500/900. In the release, ASML praised its suppliers for their support in developing the initial alpha systems. ASML indicated both Cymer and Lambda Physik developed and supplied ArF lasers for its /900 system. This announcement created renewed concern over Cymer's competitive position. -Interestingly, ASML presented results from its initial /900 trails at a conference in Austria this week, and the results were based on the system running on a Cymer laser. -We expect ASML to ship seven /900 systems in 1999, and we expect five of those to ship with Cymer lasers. The /900 system will likely never be used in volume chip manufacturing. Instead, it will be used for process development in 1999, 2000, and 2001. In 2002, a volume ramp of ASML's /1100 system should start, which will be a 300mm 193nm ArF laser-based system. That system will be the follow-on system from the /900 and will use a second or third generation ArF laser. Whether Cymer or Lambda is the preferred supplier of volume lasers for the /1100 system ramp in 2002 and beyond depends on much technical advancement work over the next few years. -Historically, when a dominant supplier in a particular market segment has lost share, it has occurred for two basic reasons: The market share leader failed to introduce a next generation system on time, or A competitor was able to introduce a system with significantly better productivity and a solid product roadmap for the future. An example of this is ASML's market share gains in the transition to DUV steppers where it out executed Nikon and Canon. -Neither one of these issues is facing Cymer today. The market is moving to Cymer's leading-edge products and the company is at the forefront of new system development. Furthermore, they are the only laser supplier capable of producing a laser that is used in volume chip manufacturing. -The primary reason there is a competitive threat is because Cymer value prices its lasers and everyone wants price competition. However, technical parity alone will not likely generate incremental sales for the competitor if it does not demonstrate an ability to consistently remain at the forefront of new product commercialization. -Lambda Physik and Komatsu do not advertise technical superiority over Cymer. They advertise lower prices and lower running costs, primarily associated with longer chamber life. This has not yet been proven in a manufacturing environment. Furthermore, Cymer is waiting in the wings with chamber life improvements to neutralize that threat if and when it develops. -We believe Lambda Physik and Komatsu will ultimately generate some level of market share supplying the trailing-edge part of the excimer laser market, much like AMD and Cyrix supply the low end of the microprocessor market. However, we believe Cymer has a sustainable competitive advantage and will likely continue to hold a dominant share at the high ASP, high margin leading-edge excimer laser market for photolithography applications. New Board Member -In a move to begin building a more equipment industry-centric board of directors, Cmyer announced yesterday that Gerald (Jerry) Taylor has joined the company's board. Taylor was Applied Materials (AMAT-$25, rated Outperform) CFO from 1984 ti 1997. During his tenure, Applied's annual revenues grew from $150 million to $4 billion. His experience should be valuable as Cymer grows. The information and opinions in this report were prepared by Morgan Stanley...