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Lam Research Corporation (LRCX)

February 13, 2013 12:40 pm ET

Executives

Martin B. Anstice - Chief Executive Officer, President and Director

Unknown Analyst

Talking about Lam Research. And I know that says, that serves, certainly this presence, yes.

Question-and-Answer Session

Unknown Analyst

But obviously, I want to spend some time on the industry, try to stay away from specific customers, because I know you have not talked about that in the past. But, obviously, when we went through this round of earnings season for your customers, and we got the CapEx guidance from the customers, at least for Wall Street, less so I think, to you, but at least for Wall Street, this was, probably for the 15 years I've been doing this, the most -- biggest delta between what people are expecting and kind of what we got. And for the most part, very, very positive. Maybe TSM, people's expectations have gotten a little bit elevated, but from Intel, Samsung, much, much better than I think what people had been expecting, and that, obviously, bodes well for the year. Consistent with what you have been saying for the several months leading up to this earnings season but much better than folks like myself and some others, I think, have been suggesting. That said, people are still having a little bit of a hard time reconciling it, because in the case of the Foundry business, Foundry is doing pretty well and so usually they're doing well, they spend more money. In the case of some of the other customers that aren't doing as well, we don't usually see this level of spending for customers that aren't doing as well, so maybe just kind of big picture thoughts, if we could start out there.

Martin B. Anstice

I'm certainly not going to conclude in the month of February that we got it better than you did.

Unknown Analyst

So far, so good.

Martin B. Anstice

Yes. And when we established the $30 billion baseline, I think, in the November timeframe, there's [indiscernible] reference point for us. I did say everybody, plus or minus $2 billion, I mean, everybody conveniently forgot the plus or minus $2 billion. So, I mean, the ability for the -- for anybody, frankly, in the supply chain and the ability for the equipment industry to kind of nail a WFE number for a year, forget it, that's not possible. So, really, I was trying more to qualitatively reference, it feels like a pretty decent year. It feels like spending in 2013 will be somewhat similar to the 2012 level and for a bunch of reasons. And the reasons are very different. Depending on the segment of the industry, we would expect the spending in the second half of the year to be materially stronger than first half. Now kind of relative to this, how much risk is there in a projection of $30 billion? There's always risk. Maybe there's some upside that I'm -- I think that's more a macro kind of reality than anything necessarily than the silicone cycle itself. The single biggest uncertainty much I'm sure to everybody's lack of surprise is in the area of NAND flash where there's a very significant technology inflection in play in the industry today that transitioned from a planar device to a 3D device. And the customers' timelines around 3D adoption are quite different. And the first customer has a plan of record to buy equipment to support a 3D device roadmap in the back end of this calendar year. And there's a fab being constructed to accommodate that equipment. And whether it's precisely in the October, November timeframe or in January, February, March, either -- for me, it doesn't matter a whole bunch of anything, there is clearly conviction and commitment to an investment in 3D NAND, and we're currently assuming about 20,000 wafer starts of capacity goes in to begin to support that migration. Having said all of that, that means that the $6 billion or $7 billion level of spending for NAND flash is kind of 30-70 in terms of percentages first half, second half, 30% in first half; 70%, second half. It all adds up mathematically, right? I mean, mathematically, it looks like the industry has capacity to support 40% bit growth. The consensus on the demand side appears to be about 50%. We exited calendar 2012 with the smallest level of qualifying capacity that has been -- that has ever, to my knowledge, been in place, very low. And we come off a year that was materially less in terms of investments in NAND flash than any of the prior 2 or 3 years. And then you kind of overlay the device commentary and SSD roadmaps and surveys and tablets and the like, the math, if you believe the assumptions I just kind of stated, looks reasonable. Now is there a scenario where people try to hold back more and create more tension in terms of balance of supply and demand? Absolutely yes. Do I know the answer to that the question? Absolutely no. But I do have a belief in the analytics that we presented that are based on the assumptions I just communicated, and we communicated at the Analyst Meeting, and it's kind of a matter of time. I think the logic space, certainly a little biased to the second half. That's more a commentary on kind of the reuse strategy of the back end of last year and the early part of this year and the plans of large accounts is to add next-generation capacity. The DRAM space mostly a conversion play and kind of fairly equal first half and second half. And Foundry, as you all know, TSMC has kind of publicly stated 2/3 first half, 1/3 second half. In reality is the other players probably created a situation where Foundry world is pretty kind of even first half, second half in spending and more diversification of spending participants in the second half. So we'll go to moving parts. I feel like it's a reasonable set of assumptions, and it might be wrong by $1 billion or $2 billion in either direction. To me, that's not very fundamental to the opportunity for Lam Research, the positioning of Lam Research products and services around the inflections, and we get to focus on the things we control.

Unknown Analyst

And I want to dig a lot more into those. But just before we get there, so, really, I mean, when you think about the improvement over the course of the year potential, the pushes and pull -- the main pushes and pulls of that are, as you said, DSLAM's publicly stated 2/3 first half, 1/3 -- or with the potential to do more if they decide to get more aggressive on 20-nanometers they go throughout the year, and there's a big customer out there for them that could drive -- so that's one push and pull. The other one is the foundries on the other side of that. The other foundries being more back-half loaded, and then potentially NAND flash being more back-half loaded. Is that sort of the right bid there? Okay. And then...

Martin B. Anstice

I guess this thumb's up. It didn't get recorded [ph].

Unknown Analyst

For those on the webcast, we've got a thumbs up, yes. And so with particular focus on the NAND flash. On one hand, it seems -- given there's so many -- this year, so many kind of pushes and pulls more than normal. On one hand, everything about that makes sense, right? NAND pricing is very healthy. NAND supply and demand is very, very good, so that all else being equal would argue for better spending in the back end. That's usually been the rule. Margins go up, pricing go up, they start to spend more money. And then you put the 3D NAND opportunity on top of that, and that makes perfect sense for the NAND pickup that -- perfectly logical for the NAND pickup back up here. On the other hand, a lot of folks who are investing in NAND flash are doing so on the basis of everybody is saying they're going to be disciplined over the course of the year, so it comes from a stock-market perspective, and this is less of an industry agreement. From a stock market perspective there seems to be a little bit of an inconsistency with how people are treating investing in the NAND flash industry versus how they're treating investing in the semi equipment. One of the other has to give a little bit unless the answer is that 3D NAND really is less about adding a whole lot of capacity. It was making the technology transition.

Martin B. Anstice

Well, I mean, there is a demand component to answering your question, right. I don't think anytime soon, discipline or lack of discipline, that people are going to go crazy adding capacity if there isn't demand for units of output. I just -- I think the days of that are long behind us, because the economics are so great. The risk profile on economics, and the risk profile on technology are so much greater today than they were 5 years ago. So to me, you either have conviction or not around consumer electronics' growth. You either have conviction or not around SSDs and servers and tablets or not. And I don't think we've been particularly aggressive in kind of positioning our assumptions in the middle of the range. And I think there's always a legitimate question around the economics for a memory company, right? I mean, how does that need to play out in terms of the ASPs for the devices they're selling and the cost of what they're adding in terms of equipment. The good news is of all of the spaces in semi, memory is the one that has the flexibility to utilize capacity over an extended duration regarding their upgradability and their conversion is net greater than exists in the logic space, and that's kind of a well proven model. And there's decent amount of conversion going on in NAND flash, not just the addition of new capacity, and the majority of the new capacity that's forecast isn't supporting 3D NAND. It's supporting the planar device and the difference between big growth demand and big growth supply.

Unknown Analyst

So that's really an important question. So the pickup that we all expect in the second half, that's mostly planar, not 3D?

Martin B. Anstice

The majority is planar.

Unknown Analyst

And so 3D was -- is really incremental to the pickup?

Martin B. Anstice

Yes, it's in the number, obviously. Presuming that the capacity goes -- I mean, I don't think the capacity that goes in is going to service bit growth demand in calendar '13. It will serve as bit growth demand in calendar '14. So if you just want to kind of get your arms around reconciling demand and investment, focus on the planar device. The 3D device is irrelevant this year for that purpose.

Unknown Analyst

Right, okay. Why don't we leave the industry stuff there for now? We may want to circle back to it. But there's an awful lot going on at Lam. You have the Novellus acquisition that you continue to integrate, there was a partnership with Axcelis that a lot of people have asked me a lot of questions about. So maybe you can give as some perspective on where we are in the integration of the plan with Novellus, how that's going. And then what the Axcelis partnership adds to what you're doing. And then you can kind of take it from there.

Martin B. Anstice

We have 24 minutes. I'll try and stay within that. I am really pleased. I cannot communicate the satisfaction that I have, what we have as a company. I cannot over communicate the messaging from customers around their perspective on the bringing together of Lam and Novellus. We worked really hard to plan it, and we had the ability because of the various regulator approvals to have a 6-months timeline between announcing a deal and being one company. And we -- and I personally made some decisions to invest in planning, because I wanted us to be very successful very quickly on the integration of 2 companies. And, we had a belief that the cultures of the company and the working norms were much more similar than not, and that's turned out to be the case. We planned some very critical and very decisive integration steps effective day 1, so single Phase 2 customer, business [indiscernible] for Lam Research, signage on buildings that say Lam Research. And then it sounds simple and easy, they're really not. And this fundamental that's creating a single company orientation allows us to be effective, representing ourselves. SEMICON West were hosting meetings with customers, and that was in July of last year, one month after the deal, were talking about all of the products. And at that point in time, it didn't look completely like a one-company commentary on the products of the company, but it was pretty good. Now, one company. And so I'm very pleased with the maturity of the company. I'm very pleased with the leadership teams' focus on the business and the customer. I mean, we are blessed to be able to say we didn't miss a beat in terms of commitments to customers of 2 stand-alone companies. And not everybody gets to say that. But the primary definition of success in the first 6 months is we execute. We meet guidance or beat it, and we deliver to the stand-alone commitments of the 2 companies and we did both. And so this year, I actually want to stop talking about integration. I know you want to still -- happy to talk about it, because we still owe you some money. I get it. It will be delivered.

Unknown Analyst

$100 million.

Martin B. Anstice

But in the company, I spent 10 minutes yesterday with 150 people in our company that are just about to launch so-called integration testing. And integration testing is something you do when you're going to a single SAP platform, and that in your re-architecting business processes. And I've stood up in front of 150 people and it's a pretty rewarding experience, because there's a lot of planning done, there's a lot of decisions made, there's a lot of competency and capability. And my message to that team was the best definition of success here is you execute this in the timeline, and we have a kind of midyear deliverable on the infrastructure synergies for the company, and the rest of the company doesn't know anything about it. Because if the rest of the company doesn't know anything about it, then we're focused on the right things, which is developing technology and products to be more competitive, getting a position to -- effectively at customers. That's a very nice statement. So nothing is ever easy, and it isn't over until it's over, but I am -- I could not have been more happier in the month of February, relative to the integration of these companies than I am today, delighted. The Axcelis commentary is kind of very different, so let's kind of talk about what the origin of that was. So the origin for us, and hopefully this has come from dialogues from the company over the last year or so. I believe that the pace of collaboration and partnership, alliances, consolidation in the semiconductor equipment space has lagged materially, while it's a occurred in the semiconductor industry. I think that is fundamental to the economics in the supply chain. I think it's fundamental to the ability of equipment companies to deliver value to customers. And there are not so many people that can provide leadership to that. We can. We are planning to. We are actively. And sometimes that's an academia commentary, sometimes that's a consortia participation in an IMEC in Europe, and in Albany here. Some part of that is within peer group collaboration partnership, where the best interest of the customers can be accelerated and both participating companies can also win. And I'm not going to tell you what I'm working on. I'll tell you what I told you. And the Axcelis deal was very simple. From their perspective, they had made a decision to be out of the strip business. From our point of view, we could strengthen the competitiveness of our product portfolio, not by adding a new product, because we already have a product, but by adding intellectual property that strengthens the nonoxidizing script applications presence of the company, and we're actively working with customers to leverage that strength. So that's kind of part number 1. Part number 2, interdependencies between segments in the industry affect your ability to learn. And one of the reasons why the value of bringing Lam and Novellus together is real is, because we're able to have a stronger product in etch, a stronger product in deposition and a stronger product in clean ultimately, because we have a learning experience around the interdependencies that was previously not available to us. We don't own Axcelis. I don't have a desire to do that, but I do have a desire to make sure that when partnerships can be developed to enable success for 2 companies and a better solution for their customer, we find ways to exploit that. So this is an attempt to architect getting information share between 2 companies to make us both more competitive, to deliver better solutions for the customers. And in the case of Axcelis, it's all around interdependencies between materials modification in implants and strip and etch, and to some extent deposition. And we're beginning the process. I don't have kind of like the perfect roadmap to say these are the line items you should expect and when you should expect it. But I'm pretty optimistic that it's the right thing to do. And I'm optimistic that over time, we'll deliver value to the customer.

Unknown Analyst

Quickly back on the Novellus piece. $100 million savings by the end of calendar year '13. How do you remind people how you expect that savings to kind of meter out over the course of the year?

Martin B. Anstice

Yes. So we're -- I think we said we were $40 million done by the time we get to the end of calendar year, so we're kind of well into this thing, and the remaining deliverables are kind of framed by 2 actions. Number one is what I just talked about, this infrastructure consolidation. You have 2 IT systems, you have 2 sets of business processes, you have 2 sets of support organizations, and we're in the process of kind of like getting to one. And our timeline for one is middle of this calendar year. And that derives a significant benefit, and most of that is in operating expenses. Some of it shows up in cost of goods sold. The second biggest deliverable is in and around the supply chain. There was a significant overlap between the suppliers in the supply chains of Lam and Novellus. And there was also a significant overlap in the products that we purchased. Both of us are buying robotics, both of us are buying frames, both of us are buying electrical harnesses, both of us are buying gas management systems, fluid management systems. Now I'm trying to have my cake and eat it, right, because I want to go to a supplier and say, "Hey, we're bigger. And I'd like a better deal." And I'm trying to stop my customer doing the same thing. So it isn't easy to execute the strategy that we've articulated, but I believe we are already, in the month of February, further ahead on the sum of all the customers' actions in the manufacturing supply chain area than we were last year as a stand-alone company or the year before. So there's a lot of work ahead of us, I don't want to kind of overstate the challenges that still remain, but I do believe we will deliver what we have committed in the timeframe that we committed it.

Unknown Analyst

If you take a step back, Lam's been so successful over the last 6 or 7 years on gaining share, because of best-of-breed product and technology in etch and tremendous share gain and tremendous leverage in the model because of it. You were very vocal over the course of time saying customers want best-of-breed products. One thing I get from investors today as well, Lam dominated etch because they have the best-of-breed products, but now they're becoming what looks like more of a one-stop shop that at times they were critical of in the past. Is that fair for people to think?

Martin B. Anstice

Yes, actually, it's fair for people whatever to think what they want to, yes. Is that what I think? No. And I do think there's a big difference between the strategy of Lam Research and the strategy of other people. And when you talk to other people you'll see if that's true. But our strategy is not to be the biggest. Our strategy is not to offer everything for the sake of offering everything. Our strategy is not to kind of bundle stuff after customer interface. Our strategy is to be the very best in etch, the very best in deposition and the very best in clean. And we believe that bringing more competency and capability to the company, getting access to more information, because we have more products, is a very significant component to doing that. It's not the only way to do it, but it's a material component of strengthening best-of-breed products in etch and clean and that. And as you all recollect, one of the things that I tried to be very clear about in the Analyst Meeting was a commitment to the vision objectives of the company and a commitment to be decisive, getting focused. It's being more complicated, it is to be focused and that's a legitimate risk you should all be attentive to. And the bigger you are, the more challenging it is to make choices and prioritize. But the decisions around Peter Wolters, or the decisions around PVD, were made to achieve better focus, better prioritization and increase the probability of being successful in etch, in deposition and in clean. And as a result of those decisions, we are #1 or strong #2 in each of the segments of the pieces that we have. And we are planning to build upon that.

Unknown Analyst

Some of the benefits are obvious in terms of scale and resources and the insight into the customer and their processes by having more steps in the process. What's the single biggest or 2 biggest challenges that you face maintaining best-of-breed technology in each of the 3 product areas with respect to the product areas as opposed to only dominating in etch, because you guys were only focused on that.

Martin B. Anstice

Probably the biggest challenge is just bandwidth, is just basic bandwidth. I mean, the bigger you are the more things you have to do. And if you don't architect a management system to deal with that, you probably fail, all right? And so we have -- and I am very convicted around a couple of principles when it comes to management system and discipline in the company. First of all, when we built Lam and Novellus together, we have hundreds -- thousands of decisions to make around organizational models, business processes, et cetera, et cetera. And I made a very practical decision, very quickly. We are going to use the Lam Research management system business processes infrastructure, unless it is not scalable, or unless it is detrimental to competitors [indiscernible]. As a result, 80% to 90% of what we were before is what we will be in the future, just kind of bigger. So we try to contain that risk. The other guiding principle that's relevant to answering this question is if you scale your company and you try to do what you did previously, if I try to use my personal time in just the same way I tried to use my personal time a year ago, I am a bottleneck. That is not my job. And that's true for the significant proportion of the leadership team of the company. And so architecting a distributed management system, making sure we enable decision-making, means that you manage that risk. It is not easy. It is very difficult, but I believe the planning, I believe the discipline, I believe that the band efficiency and the vision are going to make us successful. And we're pretty good at executing. So time will tell, but that's the plan.

Unknown Analyst

That's great. You guys announced a significant milestone on the last earnings call with a win with a -- with a larger customer. And that's been a decade in the making, and it's great. How did it happen? Why did it happen now? How much of an opportunity is there going forward?

Martin B. Anstice

It happened because we worked really hard over 5 years. And for those of you that kind of go, "Oh, that's one of the byproducts of Novellus." No. I mean, Novellus will not harm us in terms of working with our customer, because they have more years of recent experience selling and supporting products there, but it isn't as if we have none. But about 5 years ago we embarked on a very comprehensive effort to build relationships with that customer and develop partnerships and share technology and get folks in labs. And just it's a fundamentally different kind of relationship today than it was 5 years ago. Now that was a platform for the most important thing in answering your question. We have something that the customer values, and what we have is differentiated technology and on wafer results. And if you had differentiated technology and on wafer results, in the eyes of the customer, any customer in the world, we'll have a bias to work with you, and that's exactly what happened with this customer. We had the right thing at the right time. We didn't necessarily understand its applicability to everything necessarily. It ultimately got useful, but that didn't matter. What we had is an established relationship. We had significantly higher trust and recognition of the value of the company, and we had a capability that the customer valued. And just because we have all of that, doesn't mean we get a chance to relax. In fact, it means we have to work even harder, because now it's about execution, because at the end of the day one of the primary vehicles for succeeding or failing as an equipment company is the performance of equipment in the install base. So the good side of not having a position to someone is you don't have to worry about screwing up in the equipment and that part. The bad news about having a position is yes, they take you very seriously. And so focusing on seamless execution and just incredible performance and focus is a big deal. Opportunity, well, you guys know how much that customer spent. You know approximately that etch represents maybe 13% or so, plus or minus a bit of whatever they spend on WFE. That's the size of the opportunity. Are we likely to have a 100% market share of that customer next year? No, but we're going to work very hard to build upon the platform that we've established, and it is very strategic. It is very material, not just in terms of kind of the numbers, but it's material also in terms of the strategic importance of working with a company that in its industry is clearly a very significant technology leader.

Unknown Analyst

Is there any structural reason why you couldn't have the same share there that you have with the rest of the etch industry -- the rest of the industry in etch?

Martin B. Anstice

I don't think so.

Unknown Analyst

Is it -- one of the big questions I've gotten from investors over the last month is why did the U.S. companies, including Lam, sound so much better than some of the Japanese companies? Is it possible that some of that is share shift with some of the biggest customers? Can that reconcile some...

Martin B. Anstice

I doubt it. I mean, one of the things I've said in the last earnings call, and maybe I should have said it in the Analyst Meeting, for the last 12 months, we've been kind of more muted in our commentary around share again, and there's kind of 2 reasons for it. One of them is you can't keep gaining share [indiscernible]. And it's certainly much harder to gain share as a 50% market share company than it is as a 25% or 30% market share company. So that's kind of certainly part of it. But a more fundamental component of this, frankly, relates to the technology inflections that are with us in the next kind of -- or they're with us right now and will be with us for the next 2 to 3 years. If you think about kind of the Foundry world right now, so the majority of spending today in the Foundry space is a 28-nanometer investment. There will be a 20-nanometer investment that begins, and that will become a material component of spending next calendar year. And then there will be a thin set transition. So if you're running a foundry, what do you think you are trying to do in 20-nanometer selection decisions?

Unknown Analyst

Going forward.

Martin B. Anstice

Yes, you -- actually, you don't want to change anything in 28, unless you have to, because you know you have this very big transition occurring around a device transition. It is very significant. And so one of the realities today, I think, for the equipment industry, it is more difficult to gain or lose share, because the orientation of the customer, more than ever, in a period of inflection and change for them is to try and kind keep things as stable as they are until they have to for a 3D NAND transition or a thin set transition or a 450-millimeter transition. And 450 is slightly different, because most of the customers will say to us you will not have a 450-millimeter position unless you have a 300. So for those of you who think, "Wow, 450 is this great opportunity to gain or lose." Again, it is execution, and we've got to be focused on execution. But, frankly, there are not so many customers in the world that are going to take a big risk on someone at 450, if they don't have them at 300.

Unknown Analyst

So 450 is one of the things I wanted to touch on, but I'll give you just -- we're running out of time already. A couple of topics, you could pick which one we hit first. I want to talk about your incremental opportunity in 3D. I'd like to talk about UV and the puts and takes of what it means for double and quadruple patterning and where you think we are with that, I did want to touch on 450, although you may have already done that knowing you did on the CFO. So which ones do you want to hit first?

Martin B. Anstice

Maybe I can do -- add something on all of them. So patterning is a big deal for the company. So, I asked that you not get confused by thinking about the percentage of spending that gets assigned to Lam, because to me that's not the most important thing. What is the most important thing to understand is the size of the investment the customer will make in etch and deposition, and to some extent, clean equipment. And the reality is that in a patterning environment, with or without EUV, the opportunity for the company in terms of dollars of spending per 10,000 wafer starts is growing up significantly. And if you look at a representative logic flow, you can reasonably conclude that between today's technology generation in and in plus 2 is maybe up to a kind of doubling of the opportunity in terms of that kind of market. Now there's a whole range of device flows, and there's a whole range of equipment selection that you simply have to take place kind of with that, but the opportunity to grow the company, because the level of spending -- the dollars of spending as a result of patterning is very real. And in the etch space, many of you have appreciation with the conductor etch space for Lam, has been kind of the legacy of the company in terms of kind of core strength. And that's right at the heart of the transistor, and it's right at the heart of the technology that's necessary in account patterning space. So I think it's real, and I think we are well positioned to get our fair share of that opportunity. 3D NAND, a lot of the DTOR [ph] decisions have been made, the market opportunity is great for us not just in terms of absolute dollars but also in proportions, so what goes against us in logic, because of the lithography proportion is higher than the etch and deposition proportion in the transition to a 3D device, goes in our favor in that, because the lithography roadmap goes back 2 generations, and the benefit to a deposition company particularly, and an etch company is significantly greater. There are estimates of anywhere between we're saying 35% to 55% market-size expansion in the transition from a planar to a 3D NAND device. I've seen process flows that go as much as 80% higher and estimates of maybe 100. Now I'm not kind of messaging that today per se. There's a lot of unanswered questions about what it is, but there are real market increases for that company. And sometimes in logic, there may be less than what might be available if we were a lithography company and in the case of NAND flash, the reverse is true. It kind of goes in our favor. So positioning the companies, I'm very pleased about that. The challenge with 3D NAND is even if you have a DTOR position, the developmental record [ph] position, the longer the window is open between the DTOR [ph] selection on the production value, the more risk you have because someone's going to get you on the position. But we have to really double down and work very hard to hold the positions that we've won and win whatever is remaining. And our objective quite clearly is to be stronger in a 3D device environment in market share, and deliver on the planar structure. And that's part of what is going to enable the 3 to 5 to 5 to 10 or 4 to 8 percentage that you know about in terms of market share.

Unknown Analyst

One of the things that make it happen there that going back over the last 10, 15 years, there's been oftentimes where companies -- not you but different companies in the industry have said there's a lot more process steps at this particular technology inflection, and therefore capital intensity is rising, and therefore, it's going to be great. And you and I have talked about this a little bit in the past. But pricing has come down to offset the spend to an equipment company that it wasn't more capital. As a matter of fact, capital intensity in this industry's declined dramatically over the last decade, even though there are a lot more process steps going forward. You said in the past, including here last year, I think it's my job to make sure our products are differentiated enough that I can't -- I don't allow myself to have that price delayed, to have that arbitrage delayed. Where do you think we stand on that?

Martin B. Anstice

I think the reality of -- I do not think that first of all, to the assumption of your question, I do not think that you got pricing kind of play is going to deal with the fundamental economic challenges of the customer. I mean, the profitless prosperity kind of theme of prior years, there's not enough profitability in the equipment companies in the industry to kind of solve the problem that you begin with. So we are -- having said that, we are as is every equipment company under a phenomenal amount of pressure from customers to have consolidated. And the reality is we are a company that is in an industry where 3 companies represent 60% to 65% of the income for the company. And that means something, it's real. It means you have to be really good at delivering products differentiated and negotiating well. And I think you know what the answer is because the industry generally, and the company generally has a profitability level today that is less than the level it had 3 to 5 years ago. That's true for everybody. Now whether the next 3 to 5 years are going to be the same or different, you know what we're going to try to architect. You can be a believer or not.

Unknown Analyst

We already ran out of time. But let me just quickly ask what is the ideal traits that you're looking for in a new CFO?

Martin B. Anstice

A smart guy or gal. I'm looking for, obviously, the fundamentals of control, compliance. I'm looking for somebody who's effective in the investment community. I'm looking for someone who's effective at macro-level management team, influencing, driving the success of the company to the definition of success that I've described.

Unknown Analyst

Is it important to have had history in the equipment industry in your estimation?

Martin B. Anstice

It's not unhelpful.

Unknown Analyst

Not unhelpful, excellent. Thank you so much for taking the time. I appreciate it. Look forward to doing it again soon. Thank you. Thank you very much.

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Source: Lam Research Corporation Presents at Goldman Sachs Technology & Internet Conference 2013, Feb-13-2013 09:40 AM
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