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Fab-tool sales expect slowdown

Posted: 08 Feb 2007 ?? ?Print Version ?Bookmark and Share

Keywords:KLA-Tencor? Tokyo Electron? TEL? fab tools? equipment?

Two fab-tool bellwethers, KLA-Tencor Corp. and Tokyo Electron Ltd (TEL), separately posted mixed-to-upbeat results for the quarter.

But despite the positive early signs for 2007, it is still expected to be a slow year in the chip-equipment market, as previously reported. "We believe that overcapacity, price and margin pressures will prevent aggressive spending in 2007," said David Motozo Rubenstein, an analyst with Jefferies Japan Ltd, in a new report on TEL.

TEL reported on Feb. 6 a profit of about $249.7 million in its third fiscal quarter, up 166 percent from the year ago period. Citing a boom in the DRAM and flash memory sectors, TEL's sales were $1.7 billion in the quarter, up 44.8 percent. Semiconductor-equipment sales for TEL were $1.3 billion in the period, up 51.9 percent.

"Memory orders as a percentage of total orders hit a near-term record of 71 percent," Rubenstein said.

"Despite ominous price compression in DRAM, management believes that DRAM makers will continue to order gear unfazed. Our view remains less sanguine."

On the other hand, KLA-Tencor reported Monday its numbers, which fell slightly short of expectations due to order pushouts. The company reported net income of $90 million, or 44 cents a share, on revenue of $649 million in Q2.

This compared to net income of $136 million, or 67 cents per diluted share, on revenue of $629 million in Q1 of fiscal 2007, and compared to net income of $77 million, or 38 cents per diluted share, on revenue of $488 million in Q2 of fiscal 2006.

"Although KLAC reported a shortfall for the December quarter, revenue expectations (as a result of $15 million worth of shipment pushed out from the December quarter into the March quarter), for the company's March quarter revenue guidance, excluding the $15 million, is still about 3 percent above our previous estimate/consensus," according to a new report from FBR Research.

"Going forward, increased foundry bookings (from the current 15-to-25 percent) is expected to help offset the declining memory bookings in the second half of CY07," according to the report.

Meanwhile, KLA-Tencor's bottom line was mixed in the quarter, if not ugly. Its net income for the second quarter of fiscal 2007 reflects $117 million pre-tax charges. The company realized one-time charges of $67 million, including $57 million for the write-down of buildings and related assets, and $10 million for severance charges related to a reduction in force.

It also assumed acquisition-related charges of $19 million for in-process R&D and amortization of intangible assets primarily related to the acquisition of ADE Corp.

KLA-Tencor had restatement-related charges of $15 million, including compensation expense of $11 million related to the reimbursement of non-executive employees for penalty taxes under Section 409A of the Internal Revenue Code and legal and other expenses of $4 million related to the stock options investigation, shareholder litigation and related matters. Other restatement-related charges for first quarter of fiscal 2007 were $3 million.

"With the restatement of our financials recently completed, we return to regular quarterly reporting and move forward with our business with confidence. We remain focused on introducing new products that help our customers meet their mission critical production challenges," said Rick Wallace, CEO of KLA-Tencor, in a statement.

- Mark LaPedus
EE Times

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