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

To: orkrious who wrote (20115)	11/3/1998 12:01:00 PM
From: David Harker	Respond to of 25960

Jay, it seems your question is answered, but I thought of one more analogy on this. Thread, please correct if I'm out to lunch... If car company "ABC" announces that they have modified their engines and transmissions, such that they will last at least 300,000 miles, that doesn't reduce the number of cars to be sold, overall, (since other parts may wear out, etc) but it makes "ABC" cars much cheaper to own. That helps both the ABC company (lower-cost-of-ownership-product = more sales), and its customers. As a side effect, ABC can now offer longer warrantees on their products. This is not a precise match to the interior parts of a CYMI laser, but I think it captures the essential benefit to CYMI and their customers.

To: orkrious who wrote (20115)	11/3/1998 4:38:00 PM
From: orkrious	Read Replies (2) \| Respond to of 25960

Interview with Kevin Landis, a tech stock portfolio manager. He likes Cymer. multexinvestor.com FINANCIAL EXPERTS November 2, 1998 Chip Shot Kevin Landis, Manager, Firsthand Funds Interviewed by Mark Klimek Silicon Valley native Kevin Landis grew up with a fondness for technology that first led him to U.C. Berkeley, where he pursued degrees in electrical engineering and computer science. Later he found his way to San Jose, Calif.-based Dataquest, a technology research firm, where for three years he focused on storage, imaging and multimedia. Mr. Landis later served as new products marketing manager for S-MOS Systems before cofounding Firsthand Funds in July 1993. As manager of the Firsthand Technology Leaders Fund and Firsthand Technology Innovators Fund, Mr. Landis invests in a wide range of technology firms with strong growth prospects. He also looks for opportunities in beaten-down sectors of the tech industry. Recently, The Ink Well spoke with Mr. Landis about his outlook for one of the year's most decimated sectors: semiconductor capital equipment (the guys that make fabrication plants—fabs—and related tools for semiconductor manufacturers). The Ink Well: Shares of many semiconductor capital equipment firms are down 40% over the last 12 months. What happened? Kevin Landis: The Asian crisis really hit this sector hard. Semiconductor makers pulled the plug on new fabs and orders for new equipment, and that has cut some capital equipment companies' revenues in half. There are firms trading at or near their cash positions. These guys are scrambling like mad to get any orders and stay alive. TIW: Is there any reason to be hopeful about these companies in the near future? KL: Yes and no. Remember, because of Moore's Law it's only a matter of time before a fab becomes obsolete and you need a new one. And of course the electronics business will keep growing wildly, creating demand for more chips and the tools to make them. That's the "yes" part of my answer. Here's the "no" part: It's not clear that these stocks have hit bottom yet. Plants are still being closed, workers are still being laid off and these firms have no earnings visibility. Analysts are flying blind when they give out estimates for these companies. TIW: That sounds like a grim investment prognosis. What is your advice for potential investors? KL: Well, these stocks aren't for the timid. But capital equipment is a cyclical industry, and it pays to own the shares when they're cheap. You have to buy in the face of terrible fundamentals, and constant bad news like plant closings and layoffs. It takes a strong stomach not to bail out in times like these. But if you're a true value investor, semiconductor capital equipment stocks are a good place to be. My advice is be patient. TIW: How long will we have to wait? KL: It's tough to say, although a recovery could start next year. There are a bunch of new drivers for the industry that will start to gear up in 1999. One is that semiconductor makers will begin building chips at 0.18 micron, down from 0.25 micron. To do that, they'll have to upgrade a lot of the equipment in their fabs. An even bigger deal is the move from 200-millimeter silicon wafers—which are what chips are built on today—to 300-millimeter wafers. This is a huge leap forward that will increase the number of potential functioning chips on each wafer. It's also going to require chip makers to spend billions of dollars on new capital equipment. Finally, chip makers will begin to move away from using aluminum in their chips, to using copper, which is a better conductor. Copper lets electric signals travel much faster through a chip, and greatly enhances its performance capabilities. So more companies will start buying the equipment to build chips using copper. TIW: Which capital equipment firms will benefit the most from these trends? KL: I'd say companies that can solve the technological hurdles associated with these new developments. Let me give you an example. There's a manufacturing process called chemical mechanical planarization (CMP) that is hard to do at 0.18 micron and below. One of the only providers of CMP technology is Integrated Process Equipment Corp. (IPEC), and I like them despite the fact that they're laying people off and the CFO just resigned. Hey, it's a brutal business. Another new challenge is going to be using deep ultraviolet light to, in effect, stencil patterns on the wafers. Currently, companies are using light that's visible to the human eye. But it takes deep ultraviolet light to build at smaller and smaller geometries. If you were to break open the device that shines the light, which is called a stepper, you'll probably see the name Cymer Inc. (CYMI) on the light source. Cymer is going to get the lion's share of the deep ultraviolet business for 0.18-micron chip manufacturing. And in terms of copper technology, Novellus Systems Inc. (NVLS) is the current leader. They're already getting orders from chip makers that want to test drive their new copper-oriented products. TIW: What's your view on the biggest firms—companies like Applied Materials and KLA-Tencor? KL: I like them. The big guys are using their financial muscle in this market downturn to strengthen their positions. For example, Applied Materials Inc. (AMAT) is tackling CMP, the factory automation business and the copper business. Companies like Applied, KLA-Tencor Corp. (KLAC) and Teradyne Inc. (TER) will come out of this mess stronger than they were before.