Lam Research, Equipment, Semiconductor Lam sees steep decline in tool spending

SAN FRANCISCO—Shares of semiconductor equipment vendor Lam Research Corp. halted trading Wednesday (July 27), before the company reported quarterly results that beat analysts' expectations but warned of a significant decline equipment spending that would cause its revenue to contract in the previous quarter.

"We are seeing significant near term declines in wafer fab equipment spending, and as result our September quarter shipments, revenues and earnings per share will be well below our June quarter results," said Steve Newberry, Lam's CEO, in a statement.

In a conference call with analysts following the quarterly report, Newberry said investment by foundries and in DRAM capacity has slowed in recent months, although NAND capacity and conversion investments remain strong.

Newberry said Lam now expects total wafer fab equipment spending to be between $29 billion and $32 billion in 2011, an increase of as much as 10 percent over 2010, but down from Lam's previous 2011 forecast for the equipment market of $32 billion to $34 billion. Lam projects that total equipment spending in the first half of 2011 was tracking at roughly $32 billion on an annualized basis, meaning that second half spending will be flat to down 19 percent compared with the first half, Newberry said.

Newberry said that since April foundries have adjusted their 2011 spending plans in response to reduced demand for 65-nm and above capacity, which has resulted in lower utilization rates. Foundries are telling Lam they plan to delay their 32- and 28-nm ramp plans while they address typical yield ramp issues, Newberry said.

Lam now expects total equipment spending by foundries and logic IDMs to be between $10 billion and $13 billion this year, depending on the pace of yield improvement, Newberry said.

Newberry said memory players are being "very cautious" with DRAM capacity expansion plans because of concerns over slowing PC demand. Investment in NAND capacity and conversion to new technology nodes remain strong, Newberry said.

Lam reported sales for the quarter ended June 26 of $752 million, down 7 percent from the previous quarter but up 8 percent compared with the year-ago quarter. The company reported a net income in accordance with generally accepted accounting principles (GAAP) of $125.9 million, or $1.01 per diluted share, down 31 percent from the previous quarter and up 10 percent from the year-ago quarter.

On a non-GAAP basis, excluding charges, Lam reported a net income of $142.3 million, or $1.14 per share.

Consensus analysts' expectations had called for Lam to report sales of $748.8 million and non-GAAP earnings per share of $1.09, according to Yahoo Finance.

Gross margin for the June quarter declined to $338.5 million or 45 percent, compared to gross margin of $374 million or 46.2 percent in the previous quarter, Lam said.

"Lam delivered solid operating performance and financial results for the June quarter," Newberry said.

Newberry said Lam expects sales for the currentquarter to decline to between $650 million and $690 million. Lam expectsshipments in the current quarter to be worth between $555 million and$605 million, Newberry said.

Lam Research, Equipment, Semiconductor Lam sees steep decline in tool spending