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Technology Stocks : Silicon Valley Group -- Ignore unavailable to you. Want to Upgrade?

To: Ian@SI who wrote (1876)	10/9/1998 12:32:00 PM
From: FJB	Read Replies (1) \| Respond to of 2946

Never heard of them. FYI, SVGL was recently issued a patent for an EUV optics system. patents.ibm.com

To: Ian@SI who wrote (1876)	10/9/1998 1:08:00 PM
From: lrrp	Respond to of 2946

Ian, m j whitman is a value investor who has been in the semi equips since 1996; there was a column by him in Financial world sept 16,96-- take a look at the fsii thread which refers to his last quarterly report in which he discuses the semiequips makers-- exchange2000.com the full 3rd quarter report is lost some where out back with the baby, the bathwater, and the mattress, where the spare change was kept<G> eqsf is one of mr whitmans advisory groups for third ave value fund

To: Ian@SI who wrote (1876)	10/9/1998 1:42:00 PM
From: lrrp	Respond to of 2946

take a look at mjwhitman.com lots of good info on this fund and note the large position in the semi ewqps and other interesting investment ideas--ps , I do not work for his investment firm!

To: Ian@SI who wrote (1876)	10/9/1998 1:45:00 PM
From: FJB	Respond to of 2946

Lehman report on SVGL: * Yesterday Silicon Valley Group preannounced weaker than expected 4Q FY98 and early FY 99 results, and indicated that it will discontinue its 200 APS track product, in favor of a new product currently under development. * We are reducing our estimate for EPS, before charges, to $0.15 per share for 4Q, and to -$0.65 from $0.55 for FY99, excl. one-time charges. The 200 APS restructuring will result in a one-time charge of $0.80-$0.95 per share. * Overall incoming orders continue to be weak, and cancellation activity is increasing. This increases the likelihood of an operating loss for the first half of fiscal 1999. * Customers continue to maintain interest in the Micrascan product family, and for the next two quarters shipments will probably sequentially remain flat at about eight units per quarter (this is relatively good news). * Important initiatives are underway to improve the company's operating efficiency and its ability to execute well during the next chip industry recovery. However, we are reducing our one-year price targe to $11 from $15. ------------------------------------------------------------------------------ BUSINESS DESCRIPTION: SVGI is a manufacturer of photolithography systems offerning industry leading technology and performance. It also manufacturers photoresist track and wafer furnace systems. ------------------------------------------------------------------------------ Discontinuation of the APS 200. Prompting the preannouncement was the company's difficult decision to terminate its flagship wafer track product, the APS 200. This product had intially been delayed, due to reliability and manufacturing cost issues. While the system's performance has been improved, and while there are customers that are happy with it, it is a low margin product for Silicon Valley Group, and further development of the APS 200 would drain engineering resources from other projects. The follow-on product, due to be introduced next calendar year, has better performance and a lower manufacturing cost. The discontinuation of the APS 200 will result in a one-time charge of $26-31 million in the fourth (September) quarter. This will be on top of a previously announced restructuring charge of $3 million related to a 711 person workforce reduction, announced earlier. The APS 200 shutdown will result in an additional 200 person layoff. Near-term track division revenues will be very low, as a result of the discontinuation, and as the furnace division is also sluggish, the revenue mix will shift dramatically in favor of Micrascan products. The near-term order picture. Gross incoming orders (before cancellations) reached a peak of about $205 million in the fourth quarter of fiscal 1997. After moderate sequential order declines in the first and second quarters of fiscal 1998, orders dropped to $124 million in the third fiscal quarter. Gross orders were about $75-80 million for the fourth quarter. Order cancellations/pushouts had reached $35 million in the second quarter of fiscal 1998. Cancellations/pushouts declined to $13 million in the third quarter, but were back up to $35 million or so for the fourth. Net bookings for the fourth quarter were $60-65 million. This is a difficult order picture, and it prompted the company to guide analysts to a 10-15% sequential decline in revenues for the fourth fiscal quarter, and for a 10-15% decline in revenues from the second half of fiscal 1998 to the first half of fiscal 1999. Accordingly, the company believes it is likely to report operating losses through the first half of fiscal 1999. Photolithography franchise remains strong. The company continues to develop leading edge photolithography technology. Its 193nm deep UV step-and scan system, which has been in development for some time, is getting close to shipment. Management noted that Taiwanese chip manufacturers are under competitive pressure to upgrade the linewidth capability in their foundries. There is also an improvement in business with South Korean customers, which in general are focusing on 0.18 micron technology. Cash implications of the restructuring. Although the charge will be $26-31 million, the net cash effect of discontinuing the APS 200 will only be about $5 million, net after a tax credit. But operating losses and the 711 person layoff will also use cash, and the total cash balance was about $150 million at the end of the fiscal year. The company thinks the cash position could decline to about $130-135 million by the end of the second fiscal quarter, and its plan is to maintain a sustainable cash position of $125-130 million. Valuation is attractive. Our investment rating on the shares is 3 (Neutral). However, at 0.44 times book value, the shares are trading at one of the lowest multiples of book value in the semiconductor production equipment group. The shares also trade at a lower than industry average multiple of trailing revenues.