Monday, July 23, 2007

Cymer (NASDAQ:CYMI): Two firms out negative

Two tier-1 firms are negative on Cymer (NASDAQ:CYMI) this morning:

- Banc of America is cutting their revenue estimates, assuming CYMI's 2008 shipped market share will erode to the 60 percent level in 2008 from 75 percent in 2007. Gigaphoton, the Japanese competitor, is now competitive in the high end of the market, in firm's view. They think the company has qualified its immersion laser at several of the large chip makers. ASM Lithography and Nikon are also pushing Gigaphoton harder to deflect price increases and less favorable spares and service deals now being offered by Cymer. FY08 revenues go from $555 million to $515 million ($596 million consensus).

CYMI's strategy of increasing its technology leadership is not working, in BAC's view. Needless to say, CYMI's target of achieving mid-50's margins is probably unrealistic as it loses market share. Tgt is cut to $38 from $39. Neutral.

- Morgan Stanley notes their checks at the SEMICON West last week reaffirm their Underweight rated thesis on the stock. With the stock underperforming significantly since early March, they were hoping to hear constructive news flow at the show on market share, XLR500i adoption, and 2H07 DRAM immersion opportunity. However,checks were incrementally more negative on all these fronts. Consequently, the firm sees further downside to their/consensus estimates in the near-term.

Checks suggest that Cymer's market share loss is still far from reaching a trough with Gigaphoton likely to expand its share to ~40% this year. MSCO believes Gigaphoton's new GT61A immersion laser has been qualified at both ASML and Nikon. This shows that Gigaphoton has further closed the technology gap with Cymer in their view. In addition, checks also reveal poor adoption of Cymer's next generation XLR 500i laser at the OEMs. Firm recalls that XLR500i is Cymer's 45nm volume production laser intended to leapfrog competition.

Notablecalls: These comments are likely to hurt the stock today. While CYMI has underperformed the sector over the past 6 months, it increasingly looks like there will be sizable downside to current consensus estimates. Also note that ASML Holding (NYSE:ASML) a large customer of CYMI's posted a significant miss in terms of new machine order intake for the quarter.

CYMI isn't exactly expensive here but I do think we may see couple of bucks of downside today and over the next couple of days.

1 comment:

dcxavier said...

This isn't surprising. The basic technology has been stuck on DUV for several years. The shorter wavelengths have been achieved with immersion instead of a switch to EUV. That has allowed Gigaphoton to catch up as an alternate supplier. The move to 32 nm also looks like an immersion improvement.