Escaping the Carnage - Company Financial Information

Mask, metrology and wafer fab automation companies doing well

Even though many equipment and materials companies earnings are getting hammered by the current stock market downturn, other market segments are benefiting from the simultaneous migration to smaller line-widths, new materials and larger wafers.

Amid the current gloomy economic situation, a handful of positive earnings reports from equipment and materials suppliers have emerged. In addition to mask and mask-making equipment suppliers--that typically aren't affected by industry cycles--fab automation and metrology and inspection tool suppliers are also weathering the current financial storm well.

For reticle manufacturers, slumping chip sales mean design activity.

Jupiter, Fla.-based mask-maker Photronics Inc. reported its first-quarter results last week, with sales of $98.6 million, up 2 percent from the fourth quarter. Two percent may not seem much, but Bob Bollo, chief financial officer, said the figure was actually quite signficant. Because of year-end holidays, "typically we see a slowdown from the fourth quarter to the first quarter," he explained, adding that it was the first time the company (nasdaq: PLAB) had seen a sequential fourth-quarter-to-first-quarter increase in five years. "That is a pretty dramatic indication of the robustness of design activity in the marketplace right now," Bollo said.

Photronics competitor Dupont Photomasks Inc. (DPI) also cited design activity as the principal reason behind the company's latest earnings report. The Round Rock, Texas-based reticle manufacturer (nasdaq: DPMI) reported revenues for the second quarter of fiscal 2001, ended Dec. 31, totaled a record $106.8 million, 45 percent more than fiscal 2000's second-quarter $73.8 million. For the first half of the fiscal year, revenues totaled $207.4 million vs. $147.9 million in the same period the previous year.

Ken Rygler, DPI's executive vice president of worldwide marketing and strategic planning, also noted that the company's sequential quarterly growth in December was "as strong as I've ever seen it."

Both DPI and Photronics said that the push for deep-submicron, sub-wavelength design rules was spurring their companies' numbers. As chipmakers vie for position and prepare for the next upturn, they are rushing to get down to 0.18-micron designs--"All of our customers want to be at 0.18 micron," Rygler noted. Both companies expect to continue to grow during the next few quarters, even as their customers will likely see shrinking chip sales.

Softening the Blow

Aside from design shrinks, other technological trends are helping to buoy both metrology and fab automation companies: the industry migration to copper and the requisite low-k films as well as the transition to 300mm wafers. While there have been some delays in 300mm capital expenditure plans, at the moment many are still going ahead and chipmakers are still concentrating on pilot lines, anticipating the next upturn. Financial analysts covering the equipment sector have noted that technology buys remain strong, even as capacity buys have dropped.

Metrology companies are among those benefiting from technology tool purchases. San Jose-based metrology and inspection tool giant KLA-Tencor Corp. (nasdaq: KLAC) recently announced it had achieved more than 500 percent growth in sales over the past six months with its latest-generation electron-beam inspection tool, the eS2OXP. It also reported results last month for its second fiscal quarter ended Dec. 31 of record revenues of $573 million, a 73 percent increase from the same quarter ending last year and a 7 percent increase from the previous quarter.

Even Applied Materials Inc., which has been hit hard by the downturn, noted that its process diagnostic, metrology and inspection tool sales as well as that of its copper deposition tools are growing.

British materials deposition company Trikon Technologies Inc. is also apparently benefiting from the materials transition. It reported fourth-quarter earnings last week for the quarter ended Dec. 31, with net sales of $36.4 million, 132 percent higher than for the same quarter last year and 16 percent higher than previous quarter. Nigel Wheeler, president and chief executive officer of Trikon (nasdaq: TRKN), said the company, with headquarters in Newport, Wales, and Santa Clara, Calif., had yet to experience any cancellations or push-outs in its current backlog, despite the bleak outlook.

"Our engineering strength enables us to develop leading-edge technologies applicable to the most advanced devices in both silicon and compound materials," Wheeler said in a statement. "In leading-edge silicon we have developed some of the most advanced low-k dielectric deposition and etching processes and equipment. We continue to work with leading semiconductor makers to demonstrate our capabilities for both subtractive-etch and dual-damascene technologies."

But it is the transition to 300mm that seems to be beneficial to the fab automation companies. The larger, more expensive wafers have made automation critical to the transition, and this is one reason behind Asyst Technologies Inc.'s latest quarterly results. The Fremont, Calif.-based company reported net sales for the third quarter of fiscal 2001 ended Dec. 31 of $127.4 million, a 100 percent increase over net sales of $63.8 million for the third quarter. For the nine months ended Dec. 31, Asyst (nasdaq: ASYI') had net sales of $378 million vs. net sales of $131.6 million for the first nine months of fiscal 2000