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12 February 2008


Veeco boosted by HB-LED and solar market

Veeco Instruments Inc of Woodbury, NY, USA has reported fourth-quarter 2007 revenue of $106.8m. This is down 13% on $123.1m a year ago (due to a 22.4% drop in metrology sales, mainly for the semiconductor market), but up 9% sequentially.

Including $10.6m in restructuring and other charges, net loss was $9.4m, compared to net income of $7.6m a year ago.

Despite data storage orders of $36m being flat sequentially (with cancellations of $16.2m, due mainly to discontinued products), overall bookings were $114.9m (at the high end of the $105-115m guidance), up 5% on $109.1m a year ago. “We received orders of over $40m from HB-LED/wireless and solar customers for our MOCVD systems and thermal deposition sources [up 35% on a year ago],” says CEO John R. Peeler. As well as multi-unit orders and orders from several new customers in Asia, the $40m included $5m for solar applications.

“Veeco made significant progress on our profit improvement programs,” says Peeler. “We completed a 7.5% reduction in force [by about 100 staff in July to 1216 at the end of 2007], representing an annualized savings of nearly $12m. We are on track to consolidate corporate headquarters into our Plainview, NY site, which we anticipate will save $1.8m annually,” he adds. “While we will continue to rigorously focus on cost-containment activities, we are investing in our global field sales and service organization, strengthening our management team, and aligning our R&D spending to growth opportunities in LED, solar and nanotechnology."

For full-year 2007, revenue fell 9% from 2006’s $441m to $402.5m. However, this was due to data storage and semiconductor being down 25% and 35% respectively, offset by growth of 23% in MOCVD and MBE equipment for HB-LED/wireless (from $94m to $116m). During 2007, Veeco launched the TurboDisc K-series of MOCVD platforms for GaN-based blue-green LEDs (with the first K465 systems now receiving customer field acceptance) and the E475 As/P system for based red, orange and yellow LEDs and triple-junction solar cells.

Net loss was $17.4m, compared with net income of $14.9m in 2006. However, goss margin for MOCVD and MBE business improved significantly, from 30.4% in 2006 to 37.8%. Overall bookings fell by 8.5% from $493.8m to $451.6m, but this was offset by MOCVD and MBE orders for HB-LED/wireless rising 37%, from $120m in 2006 to $164m (including as much as $20m in MOCVD tools for solar applications, of which about half has been shipped).

“We have increased our MOCVD market share (based on orders) from 20% to about 35% during 2007,” says Peeler. “While we remain the number-two supplier, we have penetrated several top-tier accounts where our competitor [Aixtron] holds the install base,” he adds. “We continue to enhance our MOCVD systems, and develop new products to improve throughput efficiency.” Peeler reckons that the E475 offers 50% more throughput than competing systems being used for III-V solar cell manufacturing.

For first-quarter 2008, Veeco forecasts revenues of $98-105m and bookings of $105-112m (down sequentially due to the normal seasonality in the scientific research market).

Although first-half 2008 is starting off slowly (due to a trough period in data storage revenue), Veeco expects 2008 to be a recovery year in growth and profitability. “While we always face unpredictability in our served markets, our 2008 goal is for revenue growth at a minimum of 10% [20-25% in LED and solar process equipment; 0-5% in data-storage process equipment; 5-7% in metrology] and for operating spending to decline as a percentage of sales,” says Peeler.

“While we are cautious about macro-economic issues, we are currently experiencing positive growth trends for Veeco's MOCVD and MBE technologies in the HB-LED/wireless market, as well as early penetration in solar applications,” he adds. In LED and solar process equipment, the firm has an exceptional multi-year growth opportunity, he reckons. “We expect continued strong order patterns in the LED market, given the broadening adoption of LED. The overall LED market is forecasted to grow from $4.2bn in 2006 to $9.4bn in 2011, which is an 18% compounded annual growth rate.” However, some applications are forecasted to grow at much higher rates (e.g. nearly 40% over the next several years for LEDs for architectural and retail lighting). “Our customers are seeing increased penetration in exterior as well as interior automotive lighting, and a recent Strategy Analytics survey estimated that this market alone could be worth $1bn by 2014,” Peeler adds. LEDs are also experiencing increased adoption in laptop backlighting, with industry players expecting growth at the expense of traditional CCFL solutions.

“Given the tremendous growth opportunities we see in LED and solar, we will increase our R&D spend in MOCVD and MBE technology by about 40% in 2008,” says Peeler.

See related items:

Veeco losses lead to job cuts, despite booming MOCVD sales

Veeco’s booming HB-LED equipment sales compensate for data storage slump

Search: Veeco MOCVD MBE

See: Veeco Company Profile