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24 November 2008


Aviza increases gross margin after restructuring

For its fiscal 2008 (ended 26 September), etch and deposition equipment maker Aviza Technology Inc of Scotts Valley, CA, USA has reported sales of $133m, down a massive 42% on $231m in fiscal 2007.

“During the year we saw continued oversupply of DRAMs, which severely affected capital spending by customers worldwide,” says chairman, president & CEO Jerry Cutini. “The unfolding global financial crisis has exacerbated these problems, resulting in falling ASPs [average selling prices] among most device types and clearly showing in consumer demand for end products,” he adds. “The current global economic downturn ranks as one of the most challenging that our industry has ever faced... We are now in a period of demand-driven recession, the length of which no one is able to forecast.”

Compared to a profit of $383,000 in fiscal 2007, net loss was $47.4m, while cash and cash equivalents fell during fiscal 2008 from $23.1m to $14.9m.

Consequently, to decrease its overall dependence on the falling DRAM market, Aviza has been downsizing its programs, products and spending related to trench capacitor technology for DRAMs, involving ceasing development of large batch thermal systems. Meanwhile, in April, Aviza announced a restructuring of its product strategy, served markets and internal operations to refocus on growth market segments with its single-wafer products, including its core strengths in atomic layer deposition (ALD) technology for the sub-45nm nodes, and PVD and etch technologies for the 3D-IC, MEMS and III-Vs markets. Most of Aviza's business has now shifted to these markets. “We believe we have made substantial inroads into those end markets, all of which have positioned us to improve the balance of our business opportunities,” says Cutini.

For example, in September Aviza received multiple orders for its Delta i2L plasma-enhanced CVD (PECVD) and Omega i2L etch systems from what it described as “one of the world's leading optoelectronics manufacturers” for the production of GaAs- and InGaN-based LEDs for solid-state lighting, mobile communications and automotive applications. In addition, in October Aviza shipped multiple Sigma fxP PVD systems to a ‘top-three GaAs device maker’ (a foundry in Taiwan), after in July receiving its largest ever GaAs system order, worth $15-20m, from Taiwan’s WIN Semiconductors Corp (the world's largest pure-play GaAs foundry) for a suite of single-wafer processing systems consisting of Sigma fxP PVD, Delta fxP CVD, Omega fxP and i2L etch systems.

For fiscal fourth-quarter 2008, net sales were $35.5m (at the low end of August's $35-40m guidance range). Although this is down 29% on $50.2m a year ago, it is up slightly (by 6%) on fiscal Q3's $33.5m.

Also, operating expenses have been cut from $16.3m last quarter ($7.3m R&D and $9m selling, general & administrative) to $15.8m ($6.6m and to $7.4m, respectively), despite a one-time restructuring charge of $1.8m (due mainly to an impairment of a previously licensed technology as well as severance pay, with headcount now below 500). Operating loss has been cut from $5.3m to $2.9m.

Athough still up on $2.6m a year ago, net loss has been cut from last quarter’s $5.6m to $3.1m in fiscal Q4. Excluding stock-based compensation, amortization expense, depreciation expense, net interest expense, restructuring and other one-time charges, income taxes and net other (income) expense, adjusted net income was $941,000 (better than August’s guidance of between adjusted net loss of $3m and adjusted net income of $100,000). Though still down on adjusted net income of $65,000 a year ago, this is an improvement from an adjusted net loss of $3.6m in fiscal Q3.

In particular, gross margin improved from last quarter’s 32.9% to 36.5%, the highest since the firm became publicly listed. “It is a reflection of our ongoing efforts to sustain our financial performance in the face of an extremely challenging macroeconomic environment, which is expected to continue well into 2009,” says Cutini.

Nevertheless, predicated on Aviza’s continued focus on a shift in product mix, for fiscal first-quarter 2009 (to 26 December 2008) Aviza expects net sales to fall to $25-32m, with between adjusted net income of $50,000 and adjusted net loss of $4m.

However, given the current economic environment, Aviza considers this to be a good performance. “For the December quarter, we’re not falling off a cliff like you’ve seen some of the other equipment companies,” says executive VP & chief financial officer Patrick O'Connor. The overall semiconductor equipment market should fall 20-25% in 2009 but, after talking to customers, he believes that Aviza's targeted sectors are going to perform better than that. “We remain committed to focusing on our served market with single-wafer products,” adds Cutini. “In the short term, we’re going to have bumps in the road like everybody else, but over the long-term we’re going to see pretty decent growth in those markets that we serve.”

See related items:

Aviza expects revenue at low end of guidance, but raises guidance for income

Aviza ships PVD systems to top-3 GaAs RF device maker

Aviza wins multiple orders from HB-LED maker

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