Asyst Technologies F3Q08 (Qtr End 12/31/07) Earnings Call Transcript

Asyst Technologies (ASYT)

F3Q08 Earnings Call

January 31, 2008 4:30 pm ET

Executives

John Swenson - Vice President, Investor Relations and Corporate Treasurer

Michael A. Sicuro - Senior Vice President and Chief Financial Officer

Stephen S. Schwartz, Ph.D. - President, Chief Executive Officer and Chairman

Analysts

Analyst for Timothy Arcuri - Citigroup

Tom Diffely - Merrill Lynch

Analyst for C.J. Muse - Lehman Brothers

Ben Pang - Caris

Hari Chandra - Deutsche Bank

Jenny Yu - JP Morgan

Glenn Primack – Broadview

Presentation

Operator

Welcome to the Asyst Technologies third quarter 2008 fiscal year conference call. (Operator Instructions) I would now like to turn the conference over to John Swenson of Asyst Technologies.

John Swenson

Thank you, Eric. Good afternoon, everyone, and welcome to the Fiscal 2008 Third Quarter Conference Call for Asyst Technologies. A press release detailing our financial results for the quarter was distributed via Business Wire earlier this afternoon. The release will be posted to our website, which is at www.asyst.com. To access the release, interested parties should click on the Investor Relations link, followed by the Press Release link.

I need to remind you that during today’s call, we will be making forward-looking statements. We have no obligation to update these statements. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risk factors are described in our most recently-filed reports with the SEC, as well as today’s press release.

We also will present non-GAAP financial information in this call. For a reconciliation of our non-GAAP financial information to the equivalent measures under GAAP, please refer to the press release, which again is posted on our website.

Now to our conference call. Mike Sicuro, our CFO, will review financial highlights for the quarter as well as outlook. Steve Schwartz, our CEO, will provide a strategic overview and will comment on current product and market trends. After the formal comments, we will be happy to take your questions.

Just one note, Mike and I are both here in Fremont, California, while Steve is joining us from Japan. Our audio quality has been fine so far in our testing, with no delays. But if we have any electronic anomalies or a brief disconnection, we’d like to thank you in advance for your patience.

Now I’ll turn the call over to Mike Sicuro. Mike?

Michael A. Sicuro

Thanks, John, and good afternoon, everyone. Results for the fiscal third quarter were in line with our expectations. The top line reflected the current industry slowdown that is impacting both AMHS and our tool-related business. Despite lower sales during the quarter, we improved consolidated gross margins and generated operating cash flow. We also continued to invest in R&D, which we believe has positioned the company to emerge from the current downturn with a much stronger product portfolio.

Now to the specific results for the quarter, new orders for the quarter were $83 million, down from $96 million in Q2. In AMHS, new orders totaled $45 million, down from $61 million in the prior quarter. Only one project of size booked in the quarter, a Taiwan DRAM project, which actually was a push-out from Q2. We also saw an up tick in bookings from our largest logic and foundry customers; however, these were spread across a number of different projects, only one of which totaled more than $2 million.

New orders of tool and fab automation products totaled $38 million, up slightly from $35 million in the prior quarter. The mix of new orders was as follows: 300-millimeter, 57%; 200-millimeter, 20%; flat panel, 7%; and service was 16%. OEMs represented 28% of new orders, and the remainder, or 72%, came from end users.

By geography, new order distribution was as follows: North America, 33%; Japan, 22%; Taiwan was 32%; other Asia-Pacific, 10%, and Europe was 3%. Backlog as of the end of the quarter was $73 million; $49 million of the backlog related to AMHS, and the remaining $24 million relates to tool and $fab automation products.

Consolidated net sales for the fiscal third quarter were $106.5 million, down from $134.8 million in the prior sequential quarter. This was in line with our guidance. Net sales related to AMHS were $68.4 million, down from $86.2 million in the prior sequential quarter. This reflects the general decline in activity levels for most customers, with the exception of our largest flash memory customer in Japan.

Net sales of tool and fab automation solutions were $38 million, which compares with $48.6 million in Q2. Sales were down across most products and segments, with the notable exception of the Spartan EFEM, which had a record quarter based on shipments of more than 40 units across 15 different OEM customers.

Sales mix was as follows: 300-millimeter was 78%, 200-millimeter was 12%, flat panel was 1%, and service comprised 9%. OEMs represented 22% of sales for the quarter. By geography, sales distribution was as follows: North America was 17%; Japan, 43%; Taiwan, 23%; other Asia-Pacific was 8%; and Europe was 9%.

Consolidated gross margin for the quarter was 31%, up from 29% in Q2. The increase was primarily attributable to a higher AMHS gross margin of 24%. Although this was up four points from the prior quarter, AMHS gross margin was still below our near-term operating targets of 26-30%. We continue to reduce AMHS systems costs and are on schedule with our supply chain programs, but the impact continues to be offset by what is currently a weak project mix.

Gross margin on tool and fab automation solutions was 43%, down from 45% in the prior sequential quarter, but well within our target operating range of 41-44%. Thanks to our flexible manufacturing model, we were able to sustain gross margins at this level, despite a greater than 20% decline in sales.

Now let’s move on to operating expenses. Consolidated R&D expense was $10.5 million, up from $9.1 million in Q2. The increase was in line with our previously discussed ramp-up of product development. We expect to maintain R&D spending at approximately this level in Q4. SG&A expense was $20.9 million in the quarter, down from $23.5 million in Q2.

We are currently executing the phase of our global consolidation, which we expect will yield $8-10 million in annualized cost savings, primarily in SG&A. We expect to incur certain restructuring charges related to the cost reductions in the current quarter. We expect to realize a sequential reduction of about $1-2 million in our quarterly spending and our fiscal 2009 first quarter commencing in April.

Interest and other income was $0.4 million, down from $1.7 million in the prior quarter. Most of this decline is attributable to lower foreign exchange gains. On a non-GAAP basis, we reported net income of $1 million, or $0.02 a share. On a GAAP basis, we reported a net loss of $0.9 million, or about $0.02 a share.

We ended the quarter with $78 million in cash, up from $65 million at the end of September. The increase was primarily attributable to a strong working capital management. Receivables, inventories, and payables all declined quarter-over-quarter.

Total debt as of the end of the quarter was $135 million, up from $133 million in the prior quarter, due exclusively to currency translation. As noted previously, all of this debt is in Japan at an after-tax cost of approximately 2%.

Now to our outlook for the fiscal fourth quarter ending in March. We expect sales for the quarter to be in the range of $85-95 million. We expect AMHS to be in the range of $50-60 million, and we expect tool and fab automation sales to be approximately $35 million.

Before any restructuring charges, we expect to report a non-GAAP net loss in the range of $0.09 to $0.13 a share, and a GAAP net loss in the range of $0.12 to $0.16 a share. We expect to be cash flow neutral at this level, and we expect to again generate cash from working capital.

Steve will have more detail on the outlook in his comments. And with that, I’ll turn it over to Steve.

Stephen S. Schwartz

Thank you, Mike. I have some brief comments on the current state of the industry, our points of strategic focus, and the near-term outlook. On our last call, we indicated that we expected bookings for the second half of our current fiscal year to improve over the first half. With our fiscal Q3 ending December on the books, and reasonably clear visibility into our fiscal Q4 ending in March, we can say now that we still expect both our semiconductor and FPD bookings to be stronger in our second half, driven by AMHS.

In semiconductor, the customer segment where we’ve seen the most substantial and consistent AMHS investment is NAND Flash. Over the past two years, our largest flash customer has been ordering at the rate of $60-70 million per year in AMHS alone, booking phases of $30-35 million on six-month intervals. We expect this customer will place another order in the $30 million range in Q4.

However, flash memory isn’t the source of bookings improvement in the semiconductor we’re seeing over the second half. Instead, the increases are coming primarily from logic, as well as from smaller projects among a half-dozen different customers from foundry, rail wafers, and even DRAM.

We expect the current quarter will be our strongest for semiconductor AMHS since March of last year. We also expect the mix will be very different from a year ago, with DRAM representing no more than 10% of our new orders in AMHS. For the entire 2008 fiscal year, which matched roughly with the calendar year 2007, DRAM is likely to represent only 15% of new orders, down from 33% in the prior year.

Looking into calendar 2008 and our fiscal year that begins in April, we’ve identified two large DRAM projects that could move ahead, although there’s at least equal probability that these could push out to early next year. Even if that were to happen, if DRAM were to essentially sit out the next year, we still expect semiconductor AMHS bookings for calendar 2008 and our fiscal 2009 will improve significantly from the levels we’ve seen over this past year.

In terms of timing of orders, we have solid visibility into the March quarter. The June quarter currently looks relatively weaker, but then the second half of calendar 2008 appears stronger.

In flat panel display, over the past two years, we’ve supported our FPD infrastructure, largely through small follow-on projects at Gen 5 and Gen 6. We skipped Gen 7 when our approach to Gen 5 and 6 could not scale to the larger glass size. In the interim, we developed new products and focused sales effort around winning a key customer at Gen 8.

Earlier this month, we won the first phase of a large Gen 8 project in Korea. We’ll be automating all of the TFT lines for this project, which represents approximately half of the total AMHS opportunity. We believe the total value of our portion of the project will be in the range of $60-70 million. We expect to book approximately $30 million for the first phase in the current quarter, and the remainder will be booked in one or two additional phases over the next 6 to 12 months.

This is an important win, as it once again establishes Asyst as an important supplier to the industry and as a preferred supplier for the largest and most-demanding applications in the [fab].

We see additional FPD opportunities over the course of the next year, including opportunities at Gen 5 and Gen 6. However, we’ll be selective in pursuing projects that will provide acceptable margins, and that do not in any way dilute our capability to serve the larger multifab and large glass customers. In Q3, we elected to pass on a Gen 5 project, largely based on pricing, and we’ll continue to judge every opportunity with a critical eye.

As Mike mentioned, we’re now taking logical next steps in the integration of the company on a global basis. We’re continuing to consolidate redundant operating entities, facilities, and activities, and we’re re-aligning resources to where they are needed geographically. We are also continuing to transition our manufacturing and supply chain to reduce costs, which remains a substantial opportunity.

In the area of new products, there’s much to be gained by bringing innovation to our markets, and we’re uniquely positioned to do exactly that. The customers who are engaging with us on the subject of next-generation technology are the Tier 1 manufacturers that already are pushing the limits of current tool and fab automation capabilities.

They recognize that the next meaningful productivity gains in their $5 billion fab aren’t going to come through squeezing another $1,000 off a load port or $1 million out of an AMHS system. They understand that getting more from their current investments in tool and structure is suppressing a real economic problem. They also understand that new approaches to automation provide their best opportunity to dramatically improve productivity and capital efficiency.

For example, over the past six weeks, we’ve demonstrated to two strategic customers a material handling solution, based on our direct loading transport technology.

The solution is based on new products and capabilities developed jointly in California and Japan, which have been integrated into a targeted solution, based on specific customer requirements. These products are fully modular, allowing us to design integrated, targeted solutions for customers, using a set of common building blocks. We’re focused on delivering two additional customer milestones slated for early this spring, and we expect to see the solution in the fab before the end of the calendar year.

We also are in the beta phase of development for a new load port that will be the foundation for the next generation’s Spartan products. We expect to make beta shipments to customers by this summer.

We’re in a market segment where the competition we see in a fab cannot afford to innovate. By actually increasing R&D investments and new product activity during a downturn, we believe that we have the opportunity to emerge from this period as the only true differentiated supplier.

We’re demonstrating new capabilities to thought leading customers, and over the next 12 months, we’ll have a different look, a different focus, and a single mindset around delivering and being paid for the value we’d provide the customers. We’re looking forward to our next development milestones, and to our next opportunity to report to you on our progress. Thank you for your time today.

And I’ll ask the operator to please come back on, so we can take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question is from Timothy Arcuri - Citigroup.

[Brian Lee] - Citigroup

This is actually [Brian Lee] calling in for Tim.

First, Mike, I missed the comments on SG&A cost reductions. Were you saying $1-2 million run rate savings by fiscal year fiscal Q1 of ‘09?

Michael A. Sicuro

Yes. Starting in fiscal ‘09, which is June quarter for us, we expect to start seeing $1-2 million a quarter dropping off our SG&A costs.

[Brian Lee] - Citigroup

Is it too aggressive to kind of think that the all in OpEx by June quarter will be kind of in the $30 million range?

Michael A. Sicuro

A little bit, yes. A little bit. I think we are really trying to target, we’re putting a lot of those activities into place actually now as we speak. And conservatively speaking, I think the real impact of this is going to happen, starting in the June quarter.

[Brian Lee] - Citigroup

So $30 is probably a bit on the aggressive side?

Michael A. Sicuro

A little bit, but we might pick up a little bit of tailwind this quarter. But I’d rather be conservative and say not.

[Brian Lee] - Citigroup

Shifting gears a little bit, I guess we’ve seen some big cuts to CapEx on the DRAM side, and a relatively weak CapEx guide from the foundries, but it sounds like the NAND Flash guys are still spending for you guys.

So can you kind of give us an update on, maybe, how many fab projects you’re tracking here, and if that number has meaningfully changed in the past three months? Maybe kind of as a follow-up to that, if you’re seeing any kind of push-outs or things moving a month or two here, that’d be helpful.

Stephen S. Schwartz

All right, Brian, for sure, that DRAM has almost come to a stop, so there has been a lot of push-out. I think everybody is pretty aware of what’s going on there. We forecast, as we mentioned in the script, a couple opportunities but we don’t plan for those right now, because we could go another year without meaningful new fab activity for DRAM.

We’ll always have follow-on to change the configuration of a fab, to add a small bit of capacity, but those projects are $5 million projects, so when we report some DRAM, it will likely be to re-configure fabs.

From a NAND Flash standpoint, our exposure is to a pretty large customer who is going to continue to build out a current fab to meet the production requirements. But already, the next fab decision, we anticipate is probably mostly a year from where we thought it was, even six months ago.

[Brian Lee] - Citigroup

At that particular NAND Flash customer?

Stephen S. Schwartz

Yes.

[Brian Lee] - Citigroup

Moving to the flat panel side real quick, it sounds like so $30 million in bookings, if I heard you right, in your fiscal Q4? Can you kind of give us a sense for how that translates to the P&L in terms of revenue, sort of the timeline for that?

And also, as you start to kind of recognize that in the revenue line, given the margin difference between the AMHS business and the flat panel side of the business versus semi, can you talk about kind of what the margin impact will be here given sort of what your cost structure will be in a couple of quarters from now?

Stephen S. Schwartz

I’ll go first, and then I’ll have Mike address the rest of your question. Let me start on the back half of it. $30 million is likely for the Gen 8. There is other flat panel business that we anticipate will book this quarter related to Gen 5 and Gen 6.

So on the margin front, we had some minimum thresholds for Gen 8 and we satisfied them, and we’re really eager to get moving forward. The Gen 5 and Gen 6 are repeat and follow-on business is an even higher margin. And we put this aggregate, and added some incremental revenue to the $30 that we described, the all-in flat panel booking this quarter actually will end up at the range that the AMHS business is expected to run. So the all-in flat panel margin will be in a high 20% gross margin.

In terms of revenue recognition, I’ll have Mike address.

Michael A. Sicuro

Yes, [Brian], on the revenue with respect to the Gen 8 project, we might see a little bit of revenue coming in this quarter, but it would be small, depending on when we actually get geared up for it. We would expect to see the revenue on that project primarily in our June and September quarters, with a little bit into the December quarter. So the June and the September quarters will pick up most of the revenue on that project.

On the other follow-on project, as Steve mentioned, we’ll see some of that revenue this quarter and some of it in the June quarter.

[Brian Lee] - Citigroup

When you are talking about the June and September, are you talking about the $30 million chunk or the entire $60-70?

Michael A. Sicuro

The $30 million.

Operator

Your next question comes from Tom Diffely - Merrill Lynch.

Tom Diffely - Merrill Lynch

I was hoping you’d talk a little bit more about the pricing environment right now. It sounds like pricing pressure has eased a bit. Is that a little bit of change in the competitive front?

Stephen S. Schwartz

Yes, from pricing pressure, really no change. Probably from a gross margin standpoint, the fact that we continue to derive a large amount of revenue from a NAND flash project. That was a contract negotiated, now, a couple of years ago, and we continue to move that through the backlog. But from a pricing standpoint, everything we’ve been adding to the backlog has been at least the target gross margin level.

Tom Diffely - Merrill Lynch

And then going forward on the AMHS side, you talked about the business being up a good bit here in calendar 2008. I wasn’t too clear was NAND or the flat panel going to be the biggest driver there?

Stephen S. Schwartz

In the second half of ‘08 NAND is a contributor, but actually, there is some logic, there is a wafer maker, and even a little bit of DRAM. And so it’s a mix. For sure, the flat panel will push it up. But even on the semi side, we are going to end our fiscal year stronger than the last half of the calendar year was.

Tom Diffely - Merrill Lynch

And just quickly on the NAND side, are those facilities mainly for NAND only, or are those going to be fungible facilities that can be moved back and forth between NAND and DRAM?

Stephen S. Schwartz

Right now, NAND only.

Tom Diffely - Merrill Lynch

On the model itself, assuming that the FX impact is neutral next quarter, what would you expect interest income to be?

Michael A. Sicuro

Net interest, or call it net other interest and expense, would be around $1.5 million, a cost to expense.

Operator

Our next question comes from C.J. Muse - Lehman Brothers.

Analyst for C.J. Muse - Lehman Brothers

This is [inaudible] for C. J. Muse.

I mean, besides the flat panel projects which kind of give you a pretty good visibility on the AMHS side in that regard. Given on the semi side, given all the push ups we continue to have on the DRAM side and foundries, Toshiba not as much, but pretty much everyone else, what gives you the confidence that this business will definitely be stronger in the second half of ‘08 and the visibility as well?

Stephen S. Schwartz

Well, we are only a couple of months from the end of the fiscal year. So we are pretty good looking…

Analyst for C.J. Muse - Lehman Brothers

You were talking about the second half of fiscal rather than...

Stephen S. Schwartz

Actually, we mentioned both. So the second half of our fiscal will be stronger, the next calendar year as well, calendar 2008. When we look at the projects that we have been assessing and working on with customers now for 12 months, it feels like some of those are beginning to firm up for the second half of calendar ‘08. So over the last quarter or even two quarters, the timing of those projects really hasn’t moved, and we can say that without DRAM being a contributor.

Analyst for C.J. Muse - Lehman Brothers

So that’s more on the foundry side or the logic side?

Stephen S. Schwartz

Both logic and foundry.

Analyst for C.J. Muse - Lehman Brothers

Previously you have talked about how your capacity in terms of supplying flat panels being somewhat constrained so you won’t be able to take on many projects. You will have to pick and choose. Given the very large semi-projects that you’re getting, is there any sort of constraints on the follow-on that you’re getting from Gen 5 and Gen 6?

Stephen S. Schwartz

Actually, if we mentioned constraints, then we misspoke. Actually, we’re not constrained, we’re selective. So there is a lot of not very good business to be had, and we’re really focused on what’s going to be good business. We have plenty of manufacturing capacity to satisfy Gen 5 and Gen 6 in almost any amount, and Gen 8 without a problem.

Analyst for C.J. Muse - Lehman Brothers

What is your threshold on them on the gross margin side when you decide to either take on or walk away from a project?

Stephen S. Schwartz

That’s so really difficult one to say. We’re focused differently. We have higher margin targets for Gen 5 and Gen 6. We’re the leader in that technology, and that’s a business we never have to buy. And so that business that has to be above the current AMHS business targets per share. It’s got to be up towards 30% at least. And on the Gen 8 penetration, we did put some minimum thresholds at 20%, actually.

Analyst for C.J. Muse - Lehman Brothers

You suggested that R&D would probably stay flat in March. What’s the outlook for R&D going through fiscal ‘09?

Michael A. Sicuro

I think that this quarter Q3, Q4 is probably flat, and we’ll probably sustain that level right into the fiscal ‘09 year.

Operator

Our next question comes from Ben Pang - Caris.

Ben Pang - Caris

First, on the OEM business, you commented about the momentum you have for the Spartan. Can you talk about whether that’s with your existing customer base or is that with the new customers? And on your new customer design wins, can you give some more color about what’s driving that particular customer base towards your Spartan?

Stephen S. Schwartz

We continue to penetrate new Spartan customers. The reality of the matter is, usually, it’s with a new tool. And so penetration usually begins to convert to more business about 12

months later, just measurable new business. The ramp we had was with existing customers who we penetrated more than 12 months ago.

Yes, the reason people put the Spartan on; it’s a really proven technology now in the factory. It’s easy to integrate. It’s a unified platform that’s performing extremely well in the field, and I think it’s competitive on every technical front. And I think for the same reason we won the original customers, we continue to win the next customers here because the product capability.

Ben Pang - Caris

A follow-up on some of the questions on the AMHS business. I wasn’t clear on; you mentioned DRAM was 33%. Were you referring to your fiscal year ‘07 or is that the calendar year ‘07?

Michael A. Sicuro

The 33% was in the fiscal year ‘07.

Ben Pang - Caris

In fiscal year ‘08, DRAM will be like 15%, correct?

Michael A. Sicuro

About 15%. We anticipate less than 10% next year.

Operator

Our next question comes from Hari Chandra - Deutsche Bank.

Hari Chandra - Deutsche Bank

I just have a couple of maintenance questions. How is the gross margin guidance by segment for the upcoming quarter?

Michael A. Sicuro

We typically don’t throw out those kinds of estimates, but I think you can see the trend here in this quarter, gross margin related to both AMHS and the tool side, it’s not going to fluctuate that much going forward into the next quarter.

Hari Chandra - Deutsche Bank

And how about the tax rate?

Michael A. Sicuro

Well, when we’re in this particular position, we’re getting tax benefits, which we typically book at lower than the statutory rate. But if we had a normalized profit stream, I think you can probably factor in somewhere around 38-40% kind of for this next 12 to 14 months. And beyond that, you can see it come down a couple of points, one or two points per quarter for probably the following 12 months after that.

Operator

Next question comes from Jenny Yu - JP Morgan.

Jenny Yu - JP Morgan

What are some of your specifics for your cost reduction plan?

Michael A. Sicuro

We’re really taking a look at or have taken a look at, obviously, the non- personnel related expense is very, very hard, as you would expect to try to minimize the impact on the human capital on a company.

But given the size and nature of what we need to do, and also given the fact that a lot of this is consolidating activities that are at some of our outer regions, it will impact people, although not a lot of people. We’re not talking about large percentages, but it’s really an across-the-board from a category standpoint; it’s across-the-board from a functional standpoint; and it’s across-the-board from a departmental and divisional standpoint.

Jenny Yu - JP Morgan

So what’s your head count now, and what do you think it will be?

Michael A. Sicuro

Our head count right now is around 12, 1300 and I just really don’t want to comment on the actual head count reduction until we kind of get through that exercise, which is fair to our employees and our human capital folks.

Operator

Our next question comes from Glenn Primack - Broadview.

Glenn Primack - Broadview

Yes, could you remind us of just what the NOLs are, and then, if the tax strategies are in place to be able to use those?

Michael A. Sicuro

Our federal NOL right now in the States is around $270-ish million, and we’ve put into place already with, maybe one left to do, about a half a dozen different tax strategies that over the course of the next two to three years. It’s not as much a matter of soaking up the NOLs, it’s a matter of making sure you fairly and legally have revenue and expenses put into the different territories which maximizes your tax benefit.

Obviously, when you have NOLs in the U.S., you want to maximize revenue and earnings. When you pay tax in different other territories offshore, you want to obviously increase the cost structure there by having it done fairly and above board in accordance with all the tax authorities.

So over the course we got these tax strategies in place, cost allocations, transfer pricing, collapsing certain entities, and it’s a laundry list of things that we work on to really maximize the tax strategy and benefits that the company has embedded in its capital structure.

Glenn Primack - Broadview

And I’m not sure if it is a fair question or not, but your opinion on what mid-cyclish EBITDA. What would be like a fair number there, would $40 million be like a fair number?

Michael A. Sicuro

That’s a nice guess. I think overall before this quarter, we were generating $14, $15 million a quarter of EBITDA, and, I think that mid-cycle anywhere from $35 to $45 million is probably a fair number.

Operator

Our next question is a follow-up from Timothy Arcuri.

[Brian Lee] - Citigroup

A bigger-picture question, but if I’m hearing you correctly, it sounds like you guys are incrementally more positive with respect to the AMHS business on the non-memory side of the business versus memory. If I look at and if I listen to what you’re saying today versus three months ago, is that the right lead?

Stephen S. Schwartz

[Brian], because we think the projects haven’t moved to following a quarter closer to what we think is going to happen, so we likely sound more positive than other people. And don’t forget, we get a look at the business a little bit earlier than some of the [inaudible] folks. So, often, we’ll have a little bit earlier look.

Brian Lee - Citigroup

What I’m trying to get a clarification on is are you starting to feel that the incremental strength in the AMHS business is kind of shifting from the memory guys over to the non-memory guys is that the message you’re sending here?

Stephen S. Schwartz

Yeah, but, again, I think the important part here is because the memory has gone away, not because anything changed over the last quarter from logic or foundry. It’s just all the momentum now in the absence of strong memory will give that to be held up by logic and foundry. That’s where we had at a quarter ago it is in the same spot.

Brian Lee - Citigroup

Historically, kind of the trends in your AMHS versus tool business, can you kind of point to a typical gap between when you start to see a recovery in the AMHS size of the business, and how that translates to a pick-up on the tool side? I mean, is that a one, two-quarter gap, or you might stretch it there?

Stephen S. Schwartz

Yes. We used to be a little bit more clear on this. What’s happened is there are cycle times for anybody providing components to an equipment maker, and the cycle times have come down to a week, instead of quarters. It’s probably about a six-month gap.

In other words, the AMHS orders and the equipment orders are now closer, because the AMHS installs are going in faster and on two shifts, for example. So the entire cycle is compressed. But still the equipment guys can now wait to a pretty late moment to order. So about six months’ gap probably from AMHS order to where we see the tool front-end order for the same fab.

Operator

And at this time, there are no further questions in the queue. I would like to turn the call back over to management for any concluding remarks they may have.

Stephen S. Schwartz

Okay, everyone, thank you for the time and attention today, and we look forward to have a chance to report to you next quarter.

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