"...Early in the fourth quarter, we received requests from among our direct customers to delay certain light source shipments until the first quarter of 2007 as we believe their factories reached capacity for their most advanced tools. Through the end of the third quarter, we shipped a relatively large number of our most advanced ArF model XLA 300s to our direct customers, and to date we have only installed about half of those light sources at chipmakers, as reflected in the number of XLA 300s that remain in our direct customers' work in process. As the remaining light sources are digested it temporarily reduces the rate of demand for additional such advanced systems in the fourth quarter to a level below that of the third quarter. As our highest performance ArF product, the XLA 300 is a strong contributor to our ASP and gross margin, and a rescheduling in demand for these units has a weighted impact on our overall financial performance. Looking beyond the fourth quarter, as these light sources are absorbed and our customers' new manufacturing capacity is realized, we anticipate a resumption of the shipment rate of our XLA 300s up to the third quarter level in the first quarter of 2007...."

Translation: the "direct customers" (AKA scanner companies ASML and Nikon) have some bottlenecking issues in their own immersion and other advanced DUV tool production lines, which have led to delays in their customer installation schedules. This has forced Cymer to put the brakes on its own manufacturing ramp while it waits for the scanner folks to "digest."

Seems that equipment-manufacturing cycle times remain an issue in the lithography tool world, especially as immersion tools deploy into a production role.