I was ready to pose some additional questions to Aviza Technology's head honcho Jerry Cutini during yesterday afternoon's investor conference call, but I couldn't get through.
I hit the "star" key, followed by the "1," and nothing happened. Seems that, as I was told later, because I am not a card-carrying member of the "legit" investor relations community (merely a second son of the fourth estate), I was not eligible to participate in the Q&A following the presentation. No worries: I garnered a bit more info from Jerry via email after the call.
First off, here's the short version of Aviza's results. The company had revenues of more than $57 million for the June quarter, which brings it to over $181 million for the first nine quarters of its fiscal year. Aviza eeked out a profit---$509,000---for the third consecutive quarter, with net income for the nine-month period almost reaching $1.36 million (much better than the net loss of almost $3.9 million seen at this point last year). Business broke down to 66% in Asia (no surprise there) and 19% in Europe, with the remaining 15% in the U.S. Also, 58% of the dollar value of revenues came from 300-mm business.
Guidance for next quarter is mixed, with revenues expected to dip a bit into the $45 million to $50 million ballpark, with net income hovering around breakeven (+$500K to -$1.5M). A deal from a housing developer to purchase the company's Scotts Valley site is on the table, and negotiations continue on that front. On a more negative note, Aviza will have to pink-slip some employees, as part of its belt-tightening moves.
But the current slowdown in capacity buys is moderated both by continued tool purchases for process development and research purposes as well as early signs that memory and other chipmakers may be needing more manufacturing equipment in a few quarters, based on "increased quote activity," according to Cutini. He also says, that despite the "murky outlook in the near term," he sees the cycle being "more muted than ones in the past," and points to stabilizing NAND and DRAM prices as of late.
"My gut feeling says that they're getting close to the point where they're gonna start adding capacity," he noted in response to a question about the timing of a resumption of capacity buys by memory fabs. "I don't have a dollar amount... I have a guess, I have an opinion, and I have a dartboard in my office." (I wonder if it's the same type of dartboard that the market-research forecasters use?)
When I asked him whether the recent increases in quote activity have been in particular areas---in Aviza's case, thermal processing, atomic layer deposition, or deep silicon etch---Jerry replied that they've been "pretty much across the board." As for R&D-type buys, the company recently sold an ALD tool to SVTC, which will expose the system and technology to a wide variety of customers through the development foundry's unique market position. When asked about any slippage in the ALD commercialization timeline, Jerry said it is in volume in DRAM and believes it will be in volume in flash fabs in 2008 as well as see limited logic production use by Intel and others.
Noting that Aviza's R&D spending for the year to date is about 13% of revenues while it was over 16% of revenues for last year's ninth-month period, I asked him if they expect to stay at the current percentage of R&D spending or migrate back upwards toward the higher percentage. Also, I wondered what internal R&D programs/areas they were most focused on.
"Generally speaking, we like to be in the 12% to 14% range for R&D spending," Jerry replied. "As the revenue comes down a little, the percentage goes in the wrong direction. That said, there are some programs we feel (are) expendable for the time being, so we’ll cut back on the nonessential items. The cuts we’re making won’t affect our strategic programs. Over time, the dollars will grow with revenue but not as a percentage of sales. I think 16% is a little high to sustain over time. We don’t break out spending by product line anywhere, so I can’t give you what you ask for. However, we spend a great deal of time on ALD, WLP [wafer-level packaging], and advanced thermal applications."
I also queried him about the extent of staff reductions (by percentage and/or number of employees affected), whether those reductions will be focused on any particular parts of the company, and when the pink-slip process would be started.
"We haven’t disclosed an exact number, (but) it won’t be substantial by any measure," he explained. "Just some trimming, and it will be spread throughout the company. Most of the actions will be completed this week."
Will Aviza's decision to institute layoffs, albeit on a moderate scale, become part of a growing trend in the semiconductor manufacturing community? There are no solid indicators of anything resembling that so far, but it is clear that few have an appetite for the level and severity of the "headcount reductions" (cue virtual guillotine) seen in the dark days of the early 2000s.
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