Although Intel Corporation (Nasdaq: INTC) reported results last Thursday that beat analysts' revenue and profit forecasts, its share price fell 1% on Friday.
One reason for the fall was an announcement in the financial report, that the company planned to speed up investment in production lines in 2011, by $3 billion more than expected, to a total of $9 billion, 73% more than investments made in 2010.
Intel's investors were apparently not happy with the news, but it is good news for suppliers of equipment and systems for Intel's fabs, Israeli and foreign companies alike, and their share prices rose strongly on Friday.
Gabi Seligsohn, president and CEO of metrology solutions developer Nova Measuring Instruments Ltd. (Nasdaq:NVMI; TASE:NVMI) said, "Intel's announcement is a very strong signal about how the semiconductor market will look in 2011. Intel currently suffers in popular fields, including smart phones and tablet computers. The jump in investments means that other markets for which Intel produces processors, where it is considered the leader (servers, PCs, notebooks, communications and cellular infrastructures) will see a jump this year.
"This jump in investment means affects the industry's entire food chain, because Intel represents a certain kind of processor, and there are many other processors in each box, so if it is increasing output, the whole industry will probably produce more," he added to explain Intel's effect on the market.
Not only direct suppliers to Intel will benefit from the increase, but all suppliers in the industry; companies worth billions of dollars. The rise in the share prices of semiconductor industry equipment suppliers is also supported by analysts. For example, Standard & Poor's raised its recommendation for the semiconductor industry from "Neutral" to "Positive", saying, "Taking the news into account, we're raising our growth forecast for the industry in 2011 from 3% to 14%."
The share price of Applied Materials Inc. (Nasdaq: AMAT), whose product line encompasses nearly the full range of equipment for fabs, and which has activity in Israel, rose 7.6% on Friday, to $15.31, giving a market cap of $20.3 billion. Dutch manufacturer of photolithography systems for the semiconductor industry, ASML Holding NV (Nasdaq; AEX: ASML), rose 9.5% to $40.83, giving a market cap of $17.8 billion. The company's machines, used for burning the lines, transistors, and active parts of processors, cost $60 million each.
Among Israeli companies, automated optical inspections systems developer Camtek Ltd. (Nasdaq: CAMT; TASE:CAMT) rose 8.6% on Nasdaq to $3.55, giving a market cap of $103 million. Its US competitor, Rudolph Technologies Inc. (Nasdaq: RTEC), which is in litigation against Camtek and is a supplier to Intel, rose 5.3%.
One of the companies most affected by Intel's announcement is Nova's competitor for stand-alone metrology solutions, Nanonmetrics Inc. (Nasdaq: NANO), a supplier to Intel fabs, whose share price rose 28.8% on Friday, to $17.32, giving a market cap of $385 million.
Nova, which has not worked with Intel since 2004, was also affected by Intel's announcement. Its share price rose 9.3% on Nasdaq on Friday to $9.60, giving a market cap of $192 million. The rise capped an especially good week for the company, during which Seligsohn rang the opening bell on Nasdaq, and spoke with US investors. Describing the experience, he told "Globes" yesterday, "You feel as though you're at the Oscars."
As for Nova's business, Seligsohn outlined to the 25 US capital market entities at the conference the company's long-term strategy to reach $40 million quarterly revenue by 2013. He says that Nova plans to grow in the coming years while keeping its net profit margin at 20-25% of revenue, and its gross profit margin at 55%.
"We told the investors that we're going to increase our investment and development expenses in order to penetrate to additional parts of the production line, in order to increase revenue from the same customer base," said Seligsohn, adding, "I had 30 meetings in two and a half days, 60% of them with new investors, and 40% with current investors. I saw a very substantial jump in the depth of understanding and in the interest in the company and its future."
Nova expects to post a net profit of $21 million on $85 million revenue in 2010. The company recently announced two large contracts: a $17 million contract with foundry Taiwan Semiconductor Manufacturing Company Ltd. (NYSE: TSM; TAIEX: 2330) (TSMC); and a $10 million contract with an undisclosed customer, which market sources believe is GlobalFoundries Inc. of the US.
Intel's announcement also affected Israeli specialty foundry TowerJazz (Nasdaq: TSEM; TASE: TSEM), whose share price rose 4.1% on Nasdaq on Friday to $1.54, giving a market cap of $359 million. The day before, at its annual conference at the offices of Needham & Co. in New York, TowerJazz CEO Russell Ellwanger said that the company planned to expand its production capacity in 2011 from 900,000 wafers to 1.2 million wafers, in order to meet customer demand.
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2011
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