That said, there is an interesting debate going on about a comment the company made about demand for its equipment from the memory sector. The core issue is whether the memory sector - DRAM and NAND - can keep ramping up production in the face of declining prices. For Lam and others in the semiconductor equipment business, it is a key question, and one likely to come up over and over again as the sector reports first quarter results and looks into the rest of the year.
There seems to be a “glass-is-half-full, glass-is-half-empty” dynamic at work on the Street when it comes to this question. The half-full crowd latched onto Lam’s comment that memory-related demand this year would be “smoother” than last year, implying more predictability. The half-empty crowd sees that as an admission that demand is flattening, if not faltering.
It’s half full!
Robert Maire, Needham: Management comments that memory spending was smoothing out over the year. In reality this means that the expectation of a June quarter up 25% over the March quarter will not happen as some of that revenue, about $60 million, has slipped into the September quarter. While some investors may balk at the slippage of revenue, we think it's no big deal as most investors had discounted the up 25% guidance as likely to slip when Lam gave the guidance at the end of last quarter. Mark Bachman, Pacific Crest: Some memory customers are pushing out tool deliveries from calendar Q2 into Q3, likely resulting in a 55%/45% split between first-half and second-half memory spending rather than the previously expected 65%/35% split…we are not concerned, as Lam’s fundamentals have not changed. Patrick Ho, Stifel Nicolaus: We came away encouraged from the company’s industry perspective over the next two quarters, particularly in terms of memory capex spending and shipments…it appears that the likely decline in memory capex that we have been forecasting may be more subdued than initially thought.
It’s half empty!
Suresh Balaraman, ThinkEquity: We believe investors could be underestimating the magnitude of decline in memory spending. While the logic and foundry segment should recover from very depressed levels, the production expansion is likely to be at 130 nm and 90 nm, nodes where Lam’s share is not as high. Price target reduced to $55 from $65. C.J. Muse, Lehman: Lam offered a mixed report with EPS guidance for June/CY 07 better than consensus but ongoing shipment slippage fueled by memory makers that continues to cause us to question whether delays are only small adjustments or indicative of a bigger problem. We continue to be concerned about excess memory capacity and what this impact will have on ASPs and [second half] equipment order outlook. Maintain Equal Weight rating. Mark FitzGerald, Bank of America: Memory customers are slipping shipment dates at LRCX…the shipment push outs in conjunction with a sharp decline in first quarter memory prices and the surge in memory investment over the last five years suggest to us that we are in a topping out process for the memory cap-ex cycle. We would use the recent run in the stock above $50 to lower exposure. Raj Seth, Cowen: Over the last several weeks, customers pushed out shipment requests which drives a flatter less front-end-loaded ship plan…Management appears confident that increased demand will soak up excess capacity [in memory] and reflected confidence that customer rescheduling is just that - rescheduling - not a prelude to weaker orders/cancellations…the real question is if DRAM demand might still cool given sharp price declines. If demand doesn’t materialize [in the second half] some customers would reduce order rates.
Lam Friday was up 87 cents at $51.85.