Chipmaker supplier ASML reports lower profit on slack demand

Tue Apr 15, 2008 8:33 PM EDT

AMSTERDAM — ASML Holding NV, one of the largest makers of semiconductor manufacturing equipment, said Wednesday its first-quarter profit fell 5 percent as customers cut back on spending.

The Dutch equipment supplier to computer chip makers such as Intel Corp. and Samsung Electronics Co. said net profit fell to 145.1 million euros ($228.9 million) from 152.7 million euros in the same period a year ago. Sales fell 3.1 percent to 919.2 million euros ($1.45 billion).

The company forecast that full-year sales would be about 10 percent lower than 2007 levels.

Chief Executive Eric Meurice said Wednesday that sales would be "weaker for the next two quarters ... given our current view of the duration of the correction in semiconductor capital expenditures."

That was evident in the company's order backlog, which fell to 1.17 billion euros from 1.70 billion euros at year-end.

"We were bracing for a weaker outlook, and got what we expected and a bit more," wrote analyst Eric de Graaf of Petercam in a note on the earnings.

Shares fell 0.5 percent to 15.12 euros (US$23.92) in Amsterdam.

ASML, based in Veldhoven, Netherlands, sells lithography systems, machines that cost more than 15 million euros ($24 million) apiece and are used at the heart of the semiconductor-making process to help trace out the circuitry of chips.

The current order backlog reflects around 65 machines, of which 26 were ordered during the first quarter, ASML said.

The company is used to large fluctuations in its order book as the chip industry goes through booms and busts. Meurice said the company would cut variable costs in response to the most recent slowdown.

"We believe that the company has come a long way from the cyclical and at times cash-consuming business model of earlier years, and that the risk profile has definitely changed for the better, as shown by the strong cash flow generation in the first quarter," De Graaf said.

He said that the company's share price was near "historic lows ... potentially offering a nice entry level." Petercam has an "add" recommendation on shares.

Research firm Gartner said they expected spending on capital equipment in the semiconductor industry to fall 20 percent in 2008.