Tags: KLA-Tencor | chip | demand | KLAC

KLA-Tencor Slows as Chip Demand Slips

By    |   Tuesday, 13 Dec 2011 01:27 PM

Equipment manufacturer KLA-Tencor (KLAC) is dependent on the growth prospects of its next-level manufacturing customers to increase its own revenues and profits. Those sales and profits may slow as demand drops in the semiconductor industry.

KLA-Tencor produces process control equipment for the semiconductor, LED, data storage and other nano-electronic equipment industries. As the size of semiconductor products become smaller, KLA-Tencor products become more valuable to customers to control their own manufacturing processes.

KLA-Tencor closed out the company's 2012 first quarter on Sept. 30, 2011. For the quarter the company reported revenue of $796 million, up from $682 million a year earlier. Earnings for the quarter came in at $1.17 per share, up from 91 cents.

However, the 2011 fourth quarter produced revenues of $892 million and net income of $1.50 per share. For the next quarter, the earnings estimate is 65 cents per share, compared to earnings of $1.10 in the fiscal 2011 second quarter.

Market cycle

KLA-Tencor provides a graph of company revenues over the last 13 years. If the current downturn bears out, it will be the third down cycle since 1998. The first down cycle started from a peak in 2001 and bottomed in 2003 with revenues down about 25 percent.

Sales again peaked in 2007 and, at the market bottom in 2009, revenue was down 40 percent. For 2011, the company reported revenues of $3.2 billion, double the 2009 level. Estimated sales for 2012 are $2.82 billion, but actual results may be significantly less if the industry follows past downturn patterns.

The company did maintain the dividend level through the last down cycle. The current $1.40 per share annual payout rate puts the stock yield close to 3 percent.

Recently, the analysts at Deutsche Bank initiated coverage on KLAC with a hold rating, giving the same rating to several companies in the semiconductor capital equipment sector. A month earlier, UBS analysts reiterated their buy rating on the stock and increased their target price by $15.

The company next reports on Jan. 26.

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Equipment manufacturer KLA-Tencor (KLAC) is dependent on the growth prospects of its next-level manufacturing customers to increase its own revenues and profits. Those sales and profits may slow as demand drops in the semiconductor industry. KLA-Tencor produces process...
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2011-27-13
Tuesday, 13 Dec 2011 01:27 PM
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