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23 October 2007


Veeco losses lead to job cuts, despite booming MOCVD sales

For third-quarter 2007, Veeco Instruments Inc of Woodbury, NY, USA has reported revenue of $97.7m, flat sequentially but down 13% on $112.4m a year ago. Compared to a year ago, sales were up 14% in LEDs/wireless and 8% in research, but down 26% in semiconductor and 35% in data storage (due to delayed sales of new products).

Bookings were $118.3m, up 5% sequentially and 3% on a year ago, raising order backlog to $182m. This was driven by strong activity for scientific research (up 17% and 26%) and high-brightness LEDs/wireless (orders up 26% sequentially and 49% on a year ago, with new K-series MOCVD reactors for GaN blue-green LED epiwafers penetrating key accounts worldwide, including multi-unit orders from four key customers). Veeco also recently launched its next-generation E475 As/P reactor for red, orange and yellow LED, which has 15% greater capacity. Also, orders for the solar market were $5m, including strong interest in Veeco’s new six thermal deposition sources. However, the data storage and semiconductor markets remain challenging (down 15% and 22% sequentially, respectively).

Net loss was $5.7m, compared to net income of $4.5m a year ago. “We have initiated the first phase of a multi-quarter turnaround plan to improve Veeco's profitability through a combination of increased focus on our best growth opportunities, gross margin improvement and expense reduction and containment,” says CEO John R. Peeler. Short-term activities include a reduction in staff by about 100 employees, consultants and temporary workers, a reduction in discretionary expenses, the realignment of the sales organization to more closely match current market/regional opportunities, consolidation of certain engineering groups (specifically PVD and ion beam), and downsizing and consolidating the corporate headquarters. “I am also taking specific steps to strengthen Veeco's leadership team, and we have begun to identify strategies to accelerate the company’s growth,” adds Peeler.

For Q4/2007, Veeco expects revenues of $104-$112m (bringing full-year 2007 revenue to $400-408m, down 10% on 2006) and bookings down slightly to $105-$115m."We're providing this cautious order outlook based upon continued lack of visibility in data storage and the very strong Q3 that we have recently completed in high-brightness LED/wireless, which may be hard to repeat on a sequential basis," says CFO Jack Rein. Additional restructuring charges of $8-13m could impact Q4/2007 and Q1/2008 earnings, depending on the timing and extent of additional actions under consideration.

“While the 2007 performance for Veeco is disappointing, primarily due to the challenging overall data storage and semiconductor markets, we believe these markets have stabilized,” says Peeler. Veeco expects to exit this year with about $180m in backlog, setting the stage for an improved 2008. “We are seeing favorable growth trends for Veeco’s MOCVD and MBE technologies in the HB-LED/wireless market, as well as early penetration in specific solar applications, such as multi-junction solar cells and CIGS thermal deposition sources,” says Peeler.

Given a strong end-of-year backlog of $180m, 2008 should be a growth year, says Rein, but will start off slowly due to the movement of data storage revenues, improving only modestly in first-half 2008 compared to second-half 2007. “We are currently planning for 2008 to be a recovery year for Veeco, where we will return to better revenue growth and profitability performance,” he adds. “It will, however, be a second-half 2008 recovery.”

Peeler adds that Veeco is aligning its 2008 R&D spending onto HB-LEDs, where it sees a “significant long-term growth opportunity, with deep end-market applications”. Veeco plans to increase investment to advance technology, improve customers’ cost of ownership and gain market share. “Our goal is a multi-generational process in technology improvements to drive forward the solid-state lighting industry roadmap”.

In solar (an emerging market opportunity for Veeco), the firm plans to begin with a greater focus on its existing product lines (the MOCVD, Fixed Deposition Sources and metrology tools). “We’ll also complete a thorough business assessment of how to apply Veeco’s unique deposition and measurement technology expertise to this exciting market opportunity,” says Peeler.

See related items:

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

Veeco appoints John Peeler as CEO; receives Q1 orders of almost $11m for K-Series MOCVD systems

Veeco’s boom in MOCVD orders driven by LED market

Veeco’s HB-LED/wireless related revenues grew 42% in 2006

Search: Veeco MOCVD MBE

See: Veeco Company Profile