While I try really hard to avoid the quarterly earnings brouhahas I think it is worth it to mention a few things about the report Lam Research released last night. Suffice to say, Lam beat expectations and guided the next quarter higher than expectations. We have been discussing amongst the INFRASTRUCTURE minions that beating is not necessarily enough to drive upside action in the stock --- "It’s the 'forward' that really counts."
A few days ago I sent a note that centered on the the drivers for increased business at Lam. The insertion of SADP (Self Aligned Double Patterning), hard metal mask schemes, the transitions to FinFets and the printing of 14nm features will develop in to revenue opportunities that extend in to 2013 and 2014.
Lam is predicting that Wafer Fab Equipment (WFE) spending will be $30 to $31 billion in 2012. This is a flattish year-over-year outlook but, I think it is worth mentioning that these numbers have been moving up (the momentum started to build in the first week of December) and they have the potential to shoot much higher. Notable are the larger than expected capital spending plans announced by Intel and Samsung. Sure, TSMC has announced that they will spend less than they did last year but I would not rule out the possibility of that moving higher as this year progresses. Of course, everyone has to issue a disclaimer so Lam (along with anyone else you can think of) noted the macroeconomic issues that will, no doubt, have an influence on how much is actually spent.
90% of Lam’s shipments in the December quarter went to customers producing devices with features less than or equal to 45nm. 46% of all the quarters’ shipments were to Foundries. This quarter Lam reclassified logic manufacturers that dedicate a significant portion of their production to foundry business to the Foundry segment (more than likely this means Samsung has been placed in the Foundry segment). >50% of the shipments expected to made in the March quarter are headed to the Foundry segment.
In the coming months Lam will be providing an update on the Novellus acquisition. They expect the transaction to close in June. Most of you know that this is a perfect fit. Etch and Single Wafer Clean are offered by Lam while Novellus brings the adjacent steps of thin film deposition and wafer surface preparation. One would expect significant leverage as the combined entities develop advanced processes for 300mm and, ultimately, tools for the 450mm transition.
There have been a number of post-EPS sell-offs in tech stocks so far this year. If the shares of Lam were to dip toward $40 I’d suggest stepping up to the plate to pick some up. It’s pretty clear that good things are happening.
Much more to come.... Don't touch that dial!