|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
conference date: February 17, 2007
for quarter ending: January 28, 2007 (1st quarter fiscal 2007)
Overview: Sequential decrease in revenues and profits; good year-over-year growth. Hit by hesitation in capital spending by customers, especially in Display segment.
Basic data:
Revenues were $2.28 billion, a 10% sequential decrease, but up 23% over Q1 fiscal 2006.
Net income was $403 million, down 10% sequentially but up 183% over year-earlier.
Gross margin was 46.7%, down from 47.1% in Q4 but up from 45.1% in Q1 2006.
Cash and equivalents increased $199 million to $3.41 billion. $70 million paid in dividends.
Guidance:
Q2 2007 orders expected up 2 to 7%, revenue flat to up 5%, EPS $0.27 - $0.28. Some initiative expenses are not included.
Conference Highlights:
This quarter was in the range of our expectations and one of the strongest first quarters of our history.
Business environment is in a seasonal slowdown. There are lower levels of fab utilization. Believes in Q2 will start ramping back up. Silicon segment expected to grow in Q2; memory orders were strong. NAND flash to grow in 2nd half. More than 20 memory fabs planned for production over the next 2 years. Foundries are holding back on capital investment, but expected to come back in Q3 with ramping of 65nm. Discussing move to 32 nm with universities and chip companies.
Adjacent technologies is focused on solar silicon; expects $200 million run rate in 2007.
Ceasing development of beamline implant products.
Display business is hesitating to make investments. LCD TV volume grew by more than 100% in 2006. Expect 60% growth in 2007. So expect recovery in orders in Q2 to Q3.
New orders were $2.54 billion, down 6% sequentially, but up 24% year-over-year. Display orders in particular deceased, offset by increased Fab and Silicon orders. Backlog at quarter's end was $3.55 billion, a sequential increase from $3.4 billion. There were $111 million in backlog adjustments as some display backlog was pushed beyond 12 month window.
Customer acceptance of new vapor deposition and metal etch platforms was good. Demand for service products was strong.
Net sales by segment:
| Silicon | $1,490 million |
| Fab Solutions | $ 525 million |
| Display | $ 230 million |
| Adjacent Technologies | $ 32 million |
$550 million operating revenue. $59 million in capital spending . $61 million depreciation and amortization.
14,003 full time employees.
$20 million in net interest income.
Accounts receivable grew modestly. Inventories were up $112 million.
Accelerated share purchasing 145 million shares at $18.08. Reduced shares outstanding by 10%.
Silicon segment $1.76 billion in orders, up 5% sequentially. DRAM was 51%; flash 20%; logic & other 18% ; foundries 11%. 300 mm tools accounted for over 90% of orders. Almost all were at 100 nm or smaller levels. 65nm and smaller had over 50% of orders.
Fab solutions orders of $686 million were a record, up 10% over Q4. Lower wafer starts and utilization, typical seasonal reduction caused a decline in sales revenue.
Display sales up 39% year-over-year but down 22% sequentially due to delays by manufacturers.
Unallocated expenses were $169 million, which includes equity-based compensation.
Q&A:
Where are we in the cycle? Front half of 2007 will be DRAM intensive, with 50% of our orders. DRAM to phase down in 2nd half. But big flash projects to go through. Expects foundry to come back, has trended down over last 3 quarters. Can't get much lower. Lots of new 65nm designs in the foundries, which is a good indicator going forward. See little risk in 1st half because building to commitments.
metal gates at 45nm? We are in very good position with Intel and IBM, plus we have done our own research. We will win on metal gates with high K dialectics. Our DPM product has a very strong share at present.
Effects of falling DRAM prices? Need to look over longer term. DRAM prices were strong in 2006, so late drop is not surprising. Capacity additions will continue; conversion to Vista will spur DRAM demand. Profitability for DRAM makers was good, so they can cut prices.
Your memory customers indicated cap ex would be front-half loaded? We believe it will be balanced over the year, with DRAM front-loaded and Flash back-loaded.
January quarter was trough? Certainly for logic, foundries, and display.
Semiconductor industry cap ex for 2007? Up 4% year-over-year, we will grow faster.
Logic trends? Calendar Q1 will see utilization bottom, below 80%. But Qualcom and Broadcom, among others, are moving to 65nm, which will get foundries to increase orders. The two big logic makers appear to be continuing on their plans to spend more capital.
April quarter foundry orders? Up modestly in April, strong in July quarter.
Tax rate? 34% going quarter. We only got a 1% benefit from R&D tax credit. We got a 4% positive impact from a settlement with IRS over prior years.
Cost picture? In Q1 we knew revenue would be down, so we put cost-control in place across the boards. Always working on lowering materials costs. Investing in business transformation which costs in 2007, but will see benefits in 2008. Still need to invest in new projects and strategic priorities.
Implant market commoditization? Ion implant has little differentiation among 5 suppliers in market. Other areas are application intensive, very difficult, very interactive. So ion implants have low gross margins.
Are cycles getting less intense? In this particular part of this cycle the foundry downside has been masked by growth in memory. Industry now has shorter lead times and better inventory management, which do minimize peaks and troughs.
Can you sell Beamline assets? Need to meet customer commitments before possible sell off.
Non-GAAP gross margins? Acquisitions impacted less than .5%
Service bookings? They were up, in Q1 is seasonal peak because of service contract renewals.
Solar $200 million? Mostly in thin film amorphous silicon. Does have orders for crystalline, but focused on amorphous. $200 million is in contracts, not bookings. Will eventually give megawatts of capacity sold.
Silicon segment backlog adjustments? $25 million in cancellations, mostly just delays.
Flash? Three big guys are going to expand capacity as planned. CVD will grow faster than rest of market. Expect 150% bit growth in 2007.
Competitors guiding of flat to down sequentially? We are gaining market share. Working hard to make progress on memory, especially flash.
OpenIcon Analyst Conference Summaries Main Page
Disclaimer: Our analyst summaries may include both our condensations of statements made by company representatives and our own analysis. They are not covered by any warranty. We cannot guarantee anything said by company representatives is true. We try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.
Copyright 2007 William P. Meyers
