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Technology Stocks : Varian Semiconductor Equipment Associates -- VSEA -- Ignore unavailable to you. Want to Upgrade?

To: Duker who wrote (39)	5/17/1999 1:20:00 PM
From: Duker	Respond to of 1929

Varian Semiconductor sales slip, but new implant company optimistic [Bold --Duker] A service of Semiconductor Business News, CMP Media Inc. Story posted 11 a.m. EST/7 a.m., PST, 5/17/99 GLOUCESTER, Mass.--In its first quarterly report since being formed as a new company, Varian Semiconductor Equipment Associates Inc. here today said its revenues dropped 49% to $53.2 million in the fiscal period ending April 2 compared to $105.1 million in the same quarter last year. Sequentially, the company's sales grew 12% from $47.4 million recorded in the previous quarter. Varian Semiconductor Equipment reported a net loss of $19.2 million in the second fiscal quarter, ended April 2, compared to a net income of $10.5 million in the same period last year. In the second fiscal quarter, the new company recorded $11.6 million in special charges for inventory provisions, severance, asset write downs and other costs related to the reorganization of the operation into an independent company. The new company was created on April 2 by Varian Associates Inc., which decided last year to split itself up into three independent suppliers of semiconductor equipment, medical systems and instrumentation products. With the launch and restructuring completed, Varian Semiconductor's management is cautiously looking forward to steady improvements in the capital equipment markets as the 1999 chip gains momentum. "Based on our increase in revenues since last quarter and our increasing backlog, we are optimistic that industry growth has resumed, although we doubt the upturn will be quick," said Richard A. Aurelio, president and CEO of Varian Semiconductor. "Demand for our products is increasing, and we expect that sales growth will contribute to better capacity utilization in the coming quarters." "Longer term, our proprietary technological improvements to ion implantation will be a major driver of growth for Varian Semiconductor," Aurelio said. "Our customers are responding well to our single-wafer technology as a high-quality, cost-effective solution to the pressing demands of smaller semiconductor device geometries. The clear benefits of our single-wafer technology should become a standard customer requirement."

To: Duker who wrote (39)	5/17/1999 2:05:00 PM
From: Duker	Read Replies (2) \| Respond to of 1929

Here are my notes from the call: Sorry if they are sloppy ... I think I captured the information correctly, but I urge you to listen to the call yourselves @ Replay: 619-812-6440 #12345350. -- Gross Margin came in at 7.1% versus 35.7% y/y. -- The GM would have been 25% w/o the charges. -- The charges broke down this way: $11.6mm restructuring/one time and $5mm warranty and reserves ("balance sheet strengthening" ... saving a few dollars for a rainy day?). Attribution: 5.9mm Cost of Goods 1.6mm R&D 1.5mm G&A 2.6mm Special Line Item _____ $11.6mm ($.26/Share) Also: $5.0mm Inventory Reserves et. al. ($.11/Share) *So, Total Special* Charges Accounted for $.37/Share of the Loss. --Revenues were ~50% Product and ~50% Service (Wow!)** --High Energy Implant (acq. from Genus) is doing quite well. It is capturing a 40% market share in terms of new orders (up from 19% when it was acquired a few months ago) --SG&A would have been down if you excluded the special charge. --Over the next couple of quarters this line item will be up $1.0 to $1.5mm ... as a result of some systems work ... SAP strikes again!!! --The core SG&A run-rate is about $7mm per quarter (w/o a ton of seasonality ... except for the SAP work in the next one to two quarters). --Tax rate was 31.7% (expect it to be in the 30-35% range in the coming quarters ... further refinement TBA). --DSOs were at 91 days and INVx's were at 3x's. --Operating cash used during the quarter was $8mm and CapEx ran $2mm. --On the market for Ion Implanters: He quoted Dataquest numbers that project the market to grow at a 34% rate over the next several years (albeit from a very deep trough). --The Vista Single-Wafer Platform was lauded by Aurelio for its low CoO ... its indifference to 200mm or 300mm ... its ability to perform High-Tilt Implants ... its throughput (potential to reduce cycle time) ... its flexibility for "specials" without dummies ... and its overall goodness! --Aurelio also stressed the importance of having the full suite of products High Engergy/High Current/Mid Current because it allows the customer to really reduce training costs and parts/service costs ... --Aurelio stressed that the market was returning ... driven, for them, by Taiwan. --Bookings were in the range of 1.2 to 1.7 ( a bigger than a breadbox ... smaller than an implanter answer!) --Bookings mix was 2/3 Memory and 1/3 Logic ... expect that this will return to 50/50 with the help of Taiwan's logic buys. --Expect to see a sequential increase in bookings (N.B., This is a change from the previous guidance of "we do not have the visibility to see...") --Backlog sits at about 2Q (on what revenue assumptions, I do not know). --Lead times are b/w 3-6 months depending on the product. --Company has signed up some new customers ... outside the Memory area for the Genus High Energy product. --Aurelio on the competition: "... clear that we are gaining share." Still, very tough competition ... ETN & AMAT ... --High Energy is 10-20% of revenues. --Aurelio really stressed the Suite of Products: important from a customer standpoint with like Robotics/Software/GUI/... --Breakeven is about $70-75mm ... --Anticipate profitability at FY00 1Q.