Wednesday, May 30, 2007

Cymer (NASDAQ:CYMI): Intel capex cuts pressure estimates

- Banc of America is cutting their FY'07 earning estimates on Cymer (NASDAQ:CYMI) to $2.24 versus prior $2.46. Intel (INTC) has cut its capital spending plans for the second half. Firm thinks the details of the cuts were just released to ASML (ASML) and Nikon last week. They expect these two lithography suppliers to now share the current Intel forecast with CYMI.

On May 9th, BAC cut their ASML estimates based on weaker spending by Intel. It appears the Intel cuts are modestly deeper than originally anticipated. For instance, the 45nm ramp at Intel's fab 28 in Israel is completely pushed from the second half of 2007 into 2008.

They expect CYMI's June quarter revenue to decline qt-qt and fall short of management guidance of flat qt-qt. They are also pulling down their revenue estimates for the back half of 2007. For the entire year the firm now forecasts revenues at $505 million versus prior estimate of $527 million.

The company is aggressively repurchasing stock so a lower share count will partially offset the EPS impact from a cut in revenues. Maintains Neutral but lowers tgt to $39 from $41.

Notablecalls: Capex cuts at Intel should not come as a surprise to market participants as these were hinted by company management already a month ago at Intel's Analyst meeting. The comments regarding falling short of guidance sound somewhat more omnious and may indeed pressure the stock over the next week or so. Yet, with the stock trading 15x BAC's lowered EPS number, the valuation is quite low. Based on that, I think the downside will be muted.

In case of the unlikely event of the stock getting hit today following BAC's call, I'd be looking for a bounce.

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