January 18, 2007 – Lam Research Corp. said 4Q06 net income nearly doubled from a year ago on 77% higher revenues, beating Wall Street expectations thanks to surging demand from DRAM and NAND flash customers. But the company warned that it’s already seeing signs of order postponements from customers in what promises to be a “transition year” in 2007.
Lam Research Corp. said 4Q06 net income nearly doubled from a year ago to $167.3 million on 77% higher revenues of $633.4 million, beating Wall Street expectations thanks to surging demand from DRAM and NAND flash customers. Gross margins were 51.0%, slightly below 3Q’s 51.8%. New orders in backlog increased 7% sequentially to $779 million.
In the earnings conference call, company president/CEO Steve Newberry said he expects flat capital spending for the company’s core business of etching tools, and warned of a 5%-7% sequential decline in 1Q07 (vs. earlier-projected 5%-10% increase) due to customer delays. “We believe customers intend to moderate their growth rate and spending for capacity additions in 2007,” he said, adding that the rate of capacity additions is moderating, and customers are starting to “slow down the speed at which they take deliveries.”
He pointed out that one unidentified customer is waiting for delayed US government export license for its China fab; another has been hit by Sony’s decision to increase in-house production for chips used in its PlayStation gaming systems. Lam’s system backlog currently stands at about $719 million.
Analysts, used to seeing LRCX beat estimates with rosy figures, were quick to focus on the cautious 2007 estimates and claims of order pushouts from one of the semiconductor sector’s early reporters.
Stifel Nicolaus noted that the Lam’s admitted order volatility over the next couple of quarters signals a more cautious outlook, and confirms declining rates of capacity expansions and potential order slowdowns. JP Morgan pointed out that LRCX’s demand outlook has weakened noticeably since last quarter, and suggested investors will stagnate stocks until chip inventory visibility improves.