by James Montgomery, news editor
August 3, 2010 – Tis the season for quarterly results. A few ruminations on some key industry vendors:
MEMC. The company fell short of Street’s 2Q10 expectations (sales in its SunEdison unit were down 50%) as well as its own previous 3Q guidance; that punched the stock down 15% on Friday (7/30). But Credit Suisse’s Satya Kumar suggests MEMC is a longer-term positive looking ahead to 2011, with 14 new fabs adding capacity before this cycle swings down again. Deutsche Bank’s Steve O’Rourke notes that the company’s solar business still has work to do, saddled with acquisitions and still-high outsourcing costs (though it’s working on ramping internal wafering capacity).
Varian Semi. Equip. Assoc. Probably slightly gain share in 2010 (0-5 points) and hit record sales in 4Q, thanks to its sweetspot exposure to "capacity" investments (vs. technology buys); a new high-current tool is "in the pipeline" for 2H10 release, says Barclays’ CJ Muse. Investments in solar should translate into sales by 4Q "much sooner" than anticipated, he adds. Deutsche Bank’s O’Rourke adds that VSEA’s Solion tool, debuted at Intersolar, will ship to one customer in the current quarter, and the line could generate ~$25M-$30M in fiscal 2011.
KLA-Tencor. Swung to a $113M profit in its fiscal 4Q10 on nearly doubled revenues of $559M, beating Street expectations, with most every metric at the high end of guidance, and hiked its 1Q11 outlook. Barclays’ Muse credits a fiscal year-end push, with "a lot more onesie-twosie type orders, one-off equipment modifications and upgrades." Credit Suisse’s Kumar thinks KLAC has "saved enough powder" to impress with upcoming results too — the company sees some pullback in bookings but still sales growth. "KLAC is clearly winning, we think at Intel at 22nm" with reticle inspection, he says. Both Muse and Kumar pooh-pooh concerns about KLAC share loss, particularly in reticle inspection. "The reality is that the only share loss, if at all, has been at Samsung" which has brought in a few AMAT tools for R&D "to keep a lid on expenses" and "mostly limited to brightfield/ reticle inspection," Muse writes. And share at Intel is actually improved, he says. "These ‘share losses,’ if any, are ones that KLAC chose to have, in order to keep the line on prices," he writes. Stir in an expected boost from second-tier Taiwan memory firms and KLAC is sitting pretty, he says.
Lam Research. Another beat-and-raise story, both in the June quarter (fiscal 4Q10) and looking ahead. "Lam is delivering record shipment levels and is well positioned to gain more market share in both etch and wet clean," writes O’Rourke, but "we expect fundamentals to weaken toward year-end." Kumar points to constrained NAND supplies and the fact that NAND is growing more etch-intensive due to double-patterning — LCRX has >75% share in NAND, he notes. Kumar and Muse both point to capacity additions which are more sustainable than technology buys. Muse suggests that any "chatter of pushouts" is really just chipmakers opting for normal delivery instead of expedited delivery — since they can’t get their hands on immersion scanners soon enough, they don’t want to pay extra for rushing the other tools in-house.
Teradyne. Swung to a $122M profit, and blew out the Street’s EPS outlook ($0.69 vs. $0.47). Gross margins are the highest since 4Q93, notes Kumar, and semi test revenue ($413M) hasn’t been this high since 2000/2001. Predictions for 3Q10 ($505M sales, EPS $0.79) are "solidly above consensus" ($417M, $0.45). "Back-end cycle concerns will probably not get resolved overnight, but the company may get some credit near term for execution on margins and market share," he writes. Adds Muse: "We look for growth from HDD, memory, and SOC staying at a relatively high level."