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Revised Outlook Boost Ultratech’s Shares

Written by on May 31, 2013

Ultratech stock has jumped close to $35 after management clarified that it expects customers to accept deliveries in the second half of the year. Ultratech’s shares fell nearly 25%, to around $30, after management was unable to provide full-year guidance on the first-quarter earnings call. Chipmakers were delaying system deliveries while deciding between two types of chip designs, and Ultratech did not know when its customers when again accept orders.

By clarifying that the pause is likely to last for about two quarters, Ultratech is projecting that sales will ramp up again by the end of the third quarter (which includes pull-ins on two laser spike anneal system deliveries), but analysts still expect the adoption process could be choppy.

Ultratech’s management made two other comments that may be contributing to the surge in Ultratech’s shares. First, management believes the semiconductor industry is replacing nickel silicide with titanium silicide as the connect material in chips. Applied Materials’ AMAT thermal tools, which dominate nickel silicide annealing, aren’t suited for titanium silicide annealing, while Ultratech’s tools work well. As a result, chipmakers, which were already adopting Ultratech for nickel silicide, may need to adopt Ultratech technology sooner and in more steps than previously anticipated.

Second, memory manufacturers that are testing Ultratech’s newly introduced inspection tools, which provide overlay measurements, have provided positive feedback. Ultratech continues to see more trial orders, and one Asian customer is experiencing such good results that it is looking to order inspection tools for 9-11 process steps at some point in 2014.

Analysts see this as good news for Ultratech; not only does the inspection market add a new product line and revenue stream, it also gives Ultratech an opportunity to introduce memory makers to its LSA systems and hasten the memory industry’s adoption of LSA technologies. In all, investors are encouraged by Ultratech’s comments and see the firm as an investment with attractive upside potential.

 

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