Axcelis Technologies Inc (ACLS) 2006 Q2 法說會逐字稿

Good day, everyone, and welcome to the Axcelis second quarter 2006 earnings release conference call. As a reminder, today's conference call is being recorded.

[OPERATOR INSTRUCTIONS]

For opening remarks and introductions, I would now like to turn the call over to Ms. Maureen Hart, Vice President of Marketing and Communications. Please go ahead.

Good afternoon. This is Maureen Hart, Vice President of Marketing and Communications for Axcelis Technologies. Welcome to the conference call to discuss our results for the second quarter. If you've not received a copy of our press release issued earlier today, it is available on our website at www.axcelis.com. Discussing our results today are Mary Puma, Chairman and Chief Executive Officer, and Steven Bassett, our Executive Vice President and Chief Financial Officer. Also joining us is Mark Namaroff, our Senior Vice President of Marketing. After the prepared remarks, there will be time for questions. Playback service will be available via our website, as described in our press release.

Please note that comments made today about our expectations for future revenues, profits, and other achievements are forward-looking statements under the SEC's Safe Harbor provisions. These forward-looking statements are based on management's current expectations and are subject to risks inherent in our business. These risks are described in detail in our Form 10-K annual report and other SEC filings, which we urge you to review. Our actual results may differ materially from our current expectations. We do not assume any obligation to update these forward-looking statements.

In addition, Steve will comment on our worldwide revenue. This refers to the aggregate revenues of Axcelis and those of SEN Corporation and SHI and Axcelis Company, our 50% owned, unconsolidated subsidiary in Japan. We do not currently consolidate SEN's revenues under generally accepted accounting principles. We provide data on worldwide revenues with SEN, because we believe that it is useful to investors. SEN ion implant products are covered by a license from us and therefore the combined sales of the two companies indicate the full market penetration of our technology. Now, I would like to turn the call over to Steve.

Thank you, Maureen. Our financial performance, both our operating results and new order activity was positive and right in line with our guidance. We reported net income of 12.1 million, or $0.12 per share, on revenues of 118 million, up 20% sequentially. Worldwide revenues, which include SEN, were 198 million, in line with our forecasts. Our service business, which includes product upgrades, again showed strong performance, with revenues of 47 million, a record quarter for Axcelis. Service operations continue to be accretive to our overall gross margins.

Revenue from systems sales came in at approximately 68 million, an increase of 29% over Q1. From a product perspective, our implant business accounted for 77% of total systems revenue. Systems bookings were 112 million, compared to 53 million in the previous quarter. Bookings for 300-millimeter products accounted for 63% of new system orders. As we have said in the past, quarterly fluctuations in systems orders reflect customer buying patterns and do not necessarily indicate changes in the overall business environment.

Over the past three quarters, new systems orders have averaged 74 million. While we do not provide specific order guidance, we do expect the average order rate to remain at approximately this level through the remainder of '06. Total systems and service bookings were 159 million, an increase of 64% over Q1. On a worldwide basis, including SEN, total bookings increased by 46% to 260 million. Based on the geographic location of the fab, Asia accounted for 57% of systems orders, with 17% coming from the US and 26% from Europe. Including SEN, approximately 75% of new systems orders were from Asia.

Memory manufacturers accounted for 43% of new systems bookings, with foundries at 26% and logic at 31%. Gross margins at approximately 41%, were more in line with our forecasts at the beginning of the quarter.

Operating expenses for the quarter were approximately 41 million, slightly higher than projected due to the timing of material costs used R&D projects, increased support costs to accelerate adoption of Optima products, and variable sales commissions linked to the significant order volume. The contribution from SEN for the quarter, which includes royalties and Axcelis' 50% share of its net income, was approximately 9 million. Looking forward to the third quarter, revenues, excluding SEN, are projected to be 117 to 127 million. Worldwide revenues are forecast in the range of 187to 202 million. Gross margins are expected to increase by approximately 150 to 200 basis points, reflecting manufacturing efficiencies associated with increases in volume. Operating expenses are forecast to be flat with Q2. SEN's income and royalty contribution for the third quarter is expected to be approximately 7 million. Our effective income tax for the year is now forecast at 5%.

And net income from the quarter is projected at $0.11 to $0.15 per share. Overall the positive financial results that we realized in the second quarter and the strong outlook for Q3, show that our fundamentals remain sound. Our business model is positioned to enhance profitability at all the stages of the cycle. I will now turn the call over to Mary.

Thanks, Steve. 2006 continues to be a good year for Axcelis. We're seeing strong demand across all product lines and increasing momentum for our new products. Key wins and highlights include, first, an order for more than 20 Dry Strip tools from a major customer, second, placement of [stone] curing systems at two new customers, one in the US and the other and Asia. These tools will be used for a wide variety of emerging UV-assisted curing applications for advanced devices. Third, multiple orders for our single wafer Optima implants, both the Optima HD and the Optima MD. We received two orders in the second quarter for the Optima HD and new design in and repeat orders for the Optima MD. And, finally, capping the quarter was the shipment of our first Optima HD from Asia. SEMICON West provided a good gut check on how our customers are feeling about the future. On a whole, customers are positive about the remainder of 2006. Most believe that their inventories are in line and that demand from their customers will remain strong. As a result, our customers are continuing to invest for both capacity and technology. Although our order rate may fluctuate quarter to quarter based on project timing and customer order patterns, we believe that business will remain strong through at least the rest of this year. SEN described a similar environment in Japan. The strong market conditions, combined with SEN's leadership in the Japanese implant market, leaves SEN poised for another very good year. Some of you attended our analyst day in June. At that event, we spent a great deal of time looking at the Optima HD. The Optima HD's innovative technology provides customers with superior process control, high productivity at low energies and extendibility for 65 nanometer and beyond. During the second quarter, we introduced the Optima HD Imax.

By implanting clusters of boron instead of individual atoms, the Optima HD Imax enables users to dramatically increase productivity and reduce low-energy, high-dose process times. Molecular implantation allows customers to achieve productivity goals faster, making certain applications, like dual poly gates economically viable and virtually risk-free.

At the prestigious Global Ion Implant Technology Conference in France in mid-June, our customers validated the process performance benefits of molecular implantation with compelling data from cluster boron implants using Axcelis tools. As a result, Axcelis and our partner, SemEquip, were the center of attention at the conference. This further fueled serious interest in the Optima HD Imax. The Optima HD Imax is built on proven traditional implant technology, which will allow it to be qualified for production very quickly. Our goal is to ship our first Optima HD Imax before the end of this year. As I mentioned earlier, we shipped our first Optima HD to Asia to one of the world's largest manufacturers of memory devices. Installation and qualification have gone well, and we expect the tools to be in production on schedule. We see great potential for the Optima HD with this customer. It provides the opportunity for the Optima HD to be used in a demanding production environment across multiple segments and applications.

Just as we predicted, our design-ins have begun to accelerate and we believe they will continue to do so throughout the remainder of 2006 and into 2007. As the Optima HD becomes the high-dose tool of choice for implant customers, Axcelis is confident that it will regain its overall leadership in implants. With the Optima HD, the Optima MD, and our Rapid Strip and Radiant Strip tools gaining momentum as we expected, we move closer to our goal for regaining market share, increasing profitability and enhancing shareholder value. I would now like to open the line for questions.

[OPERATOR INSTRUCTIONS]

Our first question will come from Satya Kumar with Credit Suisse.

Yes, hi, thanks for taking my call. I was just trying to understand a spike up in bookings in the second quarter. Was it sort of driven by a bunch of eval systems that might have gotten recognized in bookings, or is this new system activity? Can you help me try and understand that, a little bit?

No, Satya, and it's all new system activity. I think that we've said that it's really dependent upon the timing of when the customers are placing the order. And we have been seeing fluctuations for the past several quarters like that. So it isn't a spike because of evals that were recognized that had actually been shipped in prior quarters.

Okay, and I think you said that your system bookings will be above the $25 million, or in that neighborhood. If I sort of assume the non-system bookings are still in that $45 million range, is $120 million bookings level sort of the right level to think about for total bookings in the back half of the year? I know you don't like to guide, but I just want to ballpark it, roughly.

I think you make your own assumptions relative to what our service bookings will be. But our service revenues have been running about 44 to 46, 47 million. And I did say that we expect to - over the last half of the year, our average bookings should approach what our average bookings have been for the last three quarters.

Okay, and a couple of other questions, quickly, to follow up. When do you expect the first cluster boron systems to ship out? I know your competitor is talking about a competitive technology that's also making progress. Relative to the commentary that Mary talked about on the implant conference, and relative to the competitor comments on [slide], how should we think about what the technology is actually going to play out eventually for this application?

Well, we should ship our first tool, our first Optima HD Imax, before the end of this year. And, as I mentioned, we expect it to be qualified very quickly. And that is in contrast to what some of the competing technologies have taken. They have been out there for many, many years. We do not expect any of those same kinds of problems because this is based on traditional implant technology.

This is Mark Namaroff, I just wanted to add to that. We think this is good timing to be ready for the ramp for dual poly gate crossing. ( mean, primarily, the first application where we see the insertion of the Imax tool is for DPG, which all major DRAM manufacturers now are interested in rolling out, starting in the beginning of 2007. So we are geared to make sure the Imax tool is timed for the rollout of DPG in production and so we expect that it will be qualified quite quickly for our customers.

Okay, that's helpful. Maybe I'll queue back for a later question. Thanks

And moving on to Jim Covello with Goldman Sachs.

Good afternoon. This is Amanda Hindlian for Jim Covello. My question is the press release indicates that your guidance for Q3 assumes no material change in the spending environment and you seem obviously pretty optimistic about systems bookings for the rest of '06. I'm curious as to whether you're considering in your guidance more recent cautious commentary from companies like TSMC, UMC and Intel, where you're hearing a lot of talking about an inventory build in the supply chain. And so the question really is, is it an issue of customer exposure that is making you feel more confident about the spending environment or is it share gains or something else?

I think it's probably a little bit of both. The way that we are looking out the rest of the year is bottoms-up look at what is going on. So we're talking to all of our customers and we have a very good handle on where they're going to go in both this quarter and in the fourth quarter. We also believe that we are gaining some share across some of our product lines. So, again, I think it's both, Amanda.

Okay, that's helpful. And then my last question is, Steve, what do you consider average system bookings levels?

Well, I was giving the average booking levels for the last three quarters, Amanda.

Okay.

So that's the last three quarters, including the second quarter of this year. We've averaged approximately $74 million per quarter. It has fluctuated off that, so we expect we will continue to average thatthrough the remainder of '06.

Thank you.

And Robert Maire with Needham has our next question.

Yes, last quarter, you gave us an update as to how many of the new systems you were expecting to ship at the end of the year. Are we still on target for that? And does that include the new cluster tool?

Yes, we are still on target for both the MD - the Optima MD and the Optima HD and our numbers have always included a mix of Optima HD. So the standard Optima HD, which was the first tool that we shipped, as well as the Optima HD Imax and the Optima HDHmax.

Okay, and in terms of near-term momentum, following on the previous question regarding the foundries and such, have you seen any near-term changes in their attitude or spending patterns? And what are using out of memory manufacturers in terms of near-term momentum?

We haven't seen any significant changes from any of our customers.

Okay. And one last question, the strip order that you announced, was that for an existing strip tool or is that a new tool? Or was that a new customer? Could you give us a little more granularity on that?

It was for an existing tool at an existing customer.

Okay, thanks.

And Timothy Arcuri with Citigroup has our next question.

Hi, a couple of things. Steve, first of all, if we basically flatlined revenue for the next few quarters, let's just say that that was the situation, would this be the new kind of gross margin benchmark here, which is about 100 to 200 basis points higher than the last few quarters?

Yes, I think we should be able to maintain that at that revenue level, Tim. That's particularly with the products that we're talking about, which are all of our core business products. Before the end of the year, we will start to recognize some revenues on Optima products, which would be incremental to that business. And wewould probably have some downward margin pressure.

Okay, but, I mean, all things being equal, the kind of core business would be in the same range?

Yes, we would expect that. Yes.

Okay, second thing, it seems like backlog is maybe, one could argue, stretching just a hair. You have about 3.5 months of backlog. That's more than you had the last four or five quarters, actually, more like six quarters. So, is this in any way - are you kind of forward booking some of the evaluation systems that are going out later on this year? Or what's the reason why the backlog is going up a bit? I might have expected that the revenue guidance would be a little bit better for September given what bookings were in June.

No, again, it is customer buying patterns and orders that we had received for maybe multiple tool shippings that will extend out for a period of time. It does not include any evaluation tools. We don't record bookings for evaluation tools until they are accepted and it turned into revenue.

Okay, great. And then I guess last question, relative to the situation at the primary eval location for the HD over in Asia, I believe they are also evaluating, or they were recently evaluating, the competitor's tool as well. Is that a change relative to what the situation - what you thought would be the situation would be going in, that they are heavily evaluating the competition's tool as well? And does that change that situation at all?

Tim, I think you are confused, becausewe shipped the first Optima HD, as I mentioned, as a standard HD configuration, for standard high-dose implants. It has nothing to do with what I believe you are referring to from a competitive position of plasma immersion tools. Our Optima HD, we expect, will be used by the customers for standard high-dose implantations. So nothing has changed for us.

Okay, so it's not, in fact, being run the head-to-head, or evaluated, head-to-head against a competitor's tool at that site?

No, it is not.

Okay, thanks.

And moving on to Peter Kim with Deutsche Bank.

Hi, thanks for taking my questions. First, I wanted to track backwards on this margin issue. You talked about recognizing Optima at the end of the year, sometime, and that would put some margin pressure Do you expect that margin pressure to increase as you recognize more of those systems in the first half of '07?

The first tools, the first Optima tools, both the Optima MD and the Optima HD that we recognize in revenue, will have lower margins than what we would expect to realize as the tools mature. But I think, as we have set in the past that as we get through the first part of '07, that we would expect to have those issues behind us. This year, we're shipping 10 tools. We probably will have manufactured 14 Optima HDs, so we'll be pretty well down the manufacturing curve by the time we get into 2007. So we don't expect to have any extended periods of margin pressure.

Okay, and then you talked about 63% of your orders being 300 millimeter. Is that 63% on the $112 million in the system revenue?

Yes, it is.

Okay. And, lastly, will SEN be adopting your Imax to compete against the [Nissan] medium current?

At this point in time, we have not licensed that technology to SEN, but we'll have to see as we move into the future if that's something that, in fact, happens.

Okay, thank you.

Moving on to Dave Heger with Kennedy Capital.

In looking at the bookings number in the quarter, can you give me any sense of what part of that might be legacy-type tools versus Optima tools?

It didn't include any Optima tools. It was all our core products, which are multi-wafer tools, 200-millimeter, both high current and high energy, 300-millimeter high energy, Dry Strip Tools, curing tools - and curing tools.

Okay, so this basically is activity with existing customers that are predominantly existing customers and just meeting kind of current needs for their buildouts.

Yes.

Okay, thanks.

CJ Muse, Lehman Brothers, has our next question.

Yes, good evening, a couple of questions. I guess, first off, on your order outlook for systems in the second half, can you talk about what kind of mix you expect between 200 millimeter and 300 millimeter?

I don't think we'll see any change versus what we have seen in the past. We usually fluctuate around 50/50, 200 millimeter and 300 millimeter. As the Optima adoption occurs, we are, however, going to see an increase and a shift more towards 300 millimeter, but you won't see that in the bookings for this year, as Steve mentioned. But I did want to indicate that in fact our own mix, from a shipment standpoint, will change.

Right, okay. And then, on the HD tool, can you comment in terms of the dialogues you're having with customers today, what percentage of overall HD tools that customers are looking at have the cluster boron technology, versus not?

Well, let me just kind of just review again a little bit about what we're doing with the cluster technology. The two primary applications that we're looking at, using cluster boron or the Imax technology, and the first main application is dual poly gate process, and that's primarily a memory application.

So all the memory manufacturers, major memory manufacturers that are currently looking to fan out dual poly gate in production, like I said before, in the beginning of 2007, and that's what they're primarily interested in. So that's our first sort of priority, now, is to make sure that the Imax tools I ready for their needs. The second application would be the use of that tool for source drain extension implants, and that's the very lowest energy implants used for logic applications.

And we currently working with several large, major logic manufacturers now to use cluster boron for those applications. Those might be a little bit later out in timeframe, maybe towards the second half of 2007, but we're really excited about that, because that just represents a larger market opportunity for us than just the DPG market alone. I hope that gives you a flavor for that. I really can't give you a percentage of breakdown, but that gives you sort of the two main applications that we're looking at.

I mean, is the dialogue 10% using the cluster boron, or 50.

Well, it depends on the customer and it depends on what they're doing in their fab and the doses that they're running. If they were not using a - let me put it to you this way, if they were not using a cluster tool or any other type of application, they would have to buy maybe double the number of ion implanters for their fab, for that type of application, because the doses are so high.

What we're doing is we're enabling our customers to lower their cost of manufacturing and so now we've been able to reduce their numbers. And our estimates may be between three to four tools per fab, in that order, for these DPG applications.

CJ, one of the things I want to add, and maybe this is where you're going with it, is I think people have implied that perhaps the only Optima HDs that we will sell are the Optima HD Imaxes, and I want to assure you that there's very strong demo activity and customer interest for the standard Optima HD.

I think that was it. Thank you.

And next is Mark Fitzgerald with Banc of America.

Thank you. I was curious if there's any more cost cutting coming in. I'm just kind of focused on the operating margins in the up part of the cycle still being in the single-digit area at this point.

No, nothing specific, other than continuing to challenge our expense base at all levels. As you notice, we have increased R&D spending a little bit to accelerate some work on certain projects. And we're still digesting the move that we made last year, but it's a continuing, ongoing process here, Mark, but there's nothing significant that I could talk about today.

So, basically, the bet here is that you're going to get the revenues up to assume closer to the 180 to 200 million to get to those mid-teens operating margins?

It depends on how you - I look at pretax margins, because I include the SEN contribution in that, but if we get up into the 140 to $150 million range, we should be generating significant operating margins. I don't believe that our costs will increase at any rate with any significant increase in revenues.

When you say significant, is that mid teens?

Yes, I think you can look at mid teens or plus that. But I think that at analyst day, we presented a model that showed that we could generate pretax margins of 28 to 30% with roughly $140 million a quarter in revenue.

Okay, thank you.

[OPERATOR INSTRUCTIONS]

And we'll move on to Michael O'Brien with Bear Stearns.

Yes, hi, thanks. Can you just go through what you think the acceptance schedule will be for the new Optima tools, from shipment to where you get sign off and you can recognize it as revenue? How long is the eval process going to be, I guess, is really my question?

The eval process runs generally from six to 12 months, and it will depend on the individual contract with the customer. And then at the end of the eval period, we fully expect that it will convert to revenue.

And do you think - would you bias that more towards the six month or the 12-month for these new tools, or does it just vary so much per customer?

It varies significantly by customer, and we're very flexible with working with the customers on that, so it will average between those two.

Okay, and I guess I'm just trying to get at - it sounds like you feel there's a lot of interest in the Optima tools, so wouldn't there be a rush for - not a rush, but maybe an accelerated acceptance process by customers so they could get them into production?

Well, they put them into production, but it still has an evaluation period, which is stipulated by an evaluation contract between us and the customer. So they wouldn't accelerate out of that evaluation period to pay us for the tool.

Okay, and then just go into a little bit more detail on the success you're having with the curing systems?

Yes, Mike, this is Mark. The curing systems, we're doing pretty well, now. We've engaged several large manufacturers, primarily logic manufacturers now, for curing of low-k films. The newest one is in Japan, and we talked about one in the US. So now we have three major customers that are currently using their curing platforms, for not only - I should mention, not only back end of line low-k curing, but also front end of line applications as well. And, again, these are evals. Actually, one of them is a purchase, two of them are evals, and we are now working closely with seeing how we roll that into production, so we're quite satisfied with the progress.

Great, thank you.

And moving on to Gavin Duffy with AG Edwards.

Thanks, just a couple of questions. Can you guys hear me okay?

Yes.

The Optima HD revenue, does that start being recognized, probably like Q1 '07. Is that correct?

We would expect that, yes.

Okay, very good. And on the HD tools, are you saying that you're going to ship to 10 different customers this year?

We expect that it would be 10 tools to seven different customers.

Okay, to seven, so there is more than one doing a couple.

Yes.

The SEN coming in at 7 million next quarter, is that just a little higher than normal and then we still expect between four and six going forward?

I think that SEN is looking at a positive year, so I think that going forward, at least through their fiscal '06, that they probably will be closer to the 7 million range.

Okay, great. And, finally, on the OpEx numbers for next quarter, I assume as I work them through the model the OpEx is going to go up another little bit. Is that correct?

No, we think that they'll be flat Q2 to Q3.

Okay, thank you very much.

And moving on to [Jagadish Iyer] with UBS.

Thanks for taking my call. I wanted to find out, given the aggressive ramp by a large Japanese [slots] manufacturer, can you help us in understanding SEN's penetration at this customer site, and what timeframe are we looking at for meaningful revenues from this customer? Thank you.

I'm not going to comment on any specific customer activity.

Thanks.

Our next question will come from Raj Seth with Cowen & Company.

Hi, just a quick follow-up on a previous question. Mark, the source-drain extension application that you talked about in logic, is that a 65-nanometer application? And, Mary, I'm curious, where are we in 65-nanometer decisions, at least on the logic side? Are we 80% through, 90% through, 50% through?

Yes, Raj, this is Mark. The source-drain extension application can be used at 65 nanometer, as well as 45 nanometer. It depends on the energy level that customers are looking at. Obviously, the most aggressive customers, even at 65 nanometer, are running below one keV in production, and of course the boron applications would give them a huge benefit below one keV, not only because it's faster, but because they don't have to use D cell. And, as you remember, the use of D cell carries a large risk of energy contamination.

So I think a lot of our customers are not only looking at the productivity gains associated with cluster boron for those implants, but also eliminating the risk of energy contamination.

So, Mark, in an application like that, what do you think - I know averages are tough, but what's the depth of the market in tools for somebody that moves in that direction in an average-sized fab? Number of tools.

Well, if I had to do a back of the envelope calculation, you're probably looking - and it depends upon the dose level and how many transistors a customer is using in a particular device. Roughly, you could look at between maybe four and six tools per fab for this type of application. And that's in addition to all the other tools they would need for all the traditional high-current applications. That would be my rough estimate.

Thanks.

And, Raj, to answer the second part of your question, we've said many times before, with the exception of perhaps one, maybe two, customers where the 65-nanometer decisions have been made, even though an initial 65-nanometer decision may have been made, we still believe there is an opportunity to get that business based on benefits that the Optima HD, for example, might have, both from a process standpoint and a cost of ownership standpoint.

So, again, with the exception of that one, or maybe two, customers, we do not feel locked out of any customer at that point.

Thank you.

Moving on to [Mike Ross] with [RTC Capital].

Hey, guys. Just wanted to get a full understanding of the new Imax. Were you mainly targeting existing customers on that, or would you be looking for a larger percentage from new customers?

Mark Namaroff; Well, that's kind of an interesting question, because we kind of sell to everybody. So I think we're looking at - it's a combination of new customers and existing customers. I feel like I said before, a lot of our existing customers know our tools very well and we've been talking to them about our Optima road map quite extensively, so those are the customers we're engaged with. And, like I said before, we're engaged with all the major manufacturers and several large logic manufacturers now, with this technology.

Okay, thanks. All the other questions were touched on. Thanks.

Next is Mark Bachman with Pacific Crest.

Yes, hi, can you tell me, has there been any change to your target level of 45% market share in the high-current segment in '07?

No.

Mary, if I build on this, can you just kind of help me then reconcile your projections versus kind of estimated market size in '07? If I look at this, I'm using a total market size of about 1.2 billion, and if I assume that the high-current portion is about 53%, I'm looking at a market size then of about 650 million. And so 45% of that would be, call it $290 million, okay?

Now, if I take a look at the market of 650 and if I just minus out, let's say, 90 million for Intel, where your competitors are entrenched there, and you don't have the ability to get in on that in '07, so that leaves me looking at a combined Axcelis-SEN trying to obtain about $290 million worth of about a $560 million market, or roughly 52% share. And I'm just trying to - is this a realistic goal for a brand-new tool that hasn't been production proven yet?

Mark, it's Steve. Yes, we think it's very realistic and we think it's truly attainable. There's a couple of things. One is is that from a market share perspective, market share is based on recognized revenue, so we're going to be entering 2007 with 10 tools in the field that we ship in 2006 that we don't recognize revenue on until 2007. If you take your 290 million and you say that SEN will be flat - and I think that that's a conservative estimate, but we'll say that SEN would be flat at approximately 125. And it gets us down to 165, and then take 10 tools that ship in '06 and back that use, whatever average sale price, between 3 and 3.5 million, right?

Right.

To give you the revenues on those tools. And you take that out and then divide that by the ASP, and you'll see that that is not an unattainable number. We're looking at somewhere in the 30 to 35 tools range.

It's just you have two very strong competitors out there, and I'll just use AMAT as an example. They've been in the market for almost three years, but they've only been able to obtain less than 100 tools, so far, in the market, and over 65% of those went to a single customer.

So if you look at the penetration outside that one customer, it hasn't been that great. And so I'm trying to judge their performance versus your expectations. You seem to be pretty set on that, that you think you can achieve that?

Well, in the past, we've actually gained significant market share in high current when we've come out with new tools - the introduction, for example, of the Ultra and the HC3, so we've done it before. We also have a different customer base than Applied Materials does.

You can make all the comparisons you want, but, again, we've done the bottoms-up analysis. Steve just gave you the logic behind how we did the math, and it's, again, achievable and attainable.

Okay, thank you very much.

We'll now move to a follow up from Satya Kumar with Credit Suisse.

Hi, did you disclose your implant and non-implant bookings in 2Q, and can you give us the number in 1Q?

We didn't disclose the bookings, but between implant and non-implant. We typically - we disclose the implant portion of our revenues, which was 77%, and, Satya, their revenue number runs between 75 and 80% each and every quarter.

Okay, I mean, I was just trying to understand if Optima then drives Q2 bookings, is that possible, because these are eval systems and wouldn't have made it into the bookings in the first place anyway, right?

It was not eval systems that came into the booking statement. I think I just spoke earlier, we actually did book three Optima MDs in the second quarter. I said it was all core business products, but we did have three Optima MDs booked in the second quarter, but they were not evaluation tools. They were new orders, for follow-on orders, one new design-in and two follow-on orders.

Yes, but you have shipped one Optima HD so far, so you have to ship another nine of these by the end of this year, and the commitments that you enter into with your customers to ship those two will not have an impact on your bookings, which you announced in June?

No, and most of those tools will ship against evaluation contracts, and we do not include evaluation tools in our bookings statistics.

Okay, when do you expect the repeat orders to come from the first HD customer, assuming they start ramping production?

Well, it will either be this quarter or next quarter, but it will definitely be before the end of the year. Remember, I said we were going to ship 10 tools to seven customers, so there will be repeat tools in what we ship in 2006.

Okay, and how many Hmax, or the hydrogen implanters, do you expect to ship this year?

Two.

Is that a change from your analyst day of what you were maybe looking for a bit more than that, or is it consistent with what you're expecting?

No, it's consistent.

All right. Thank you.

And we have time for one more question, and that comes in the form of a follow-up from Peter Kim, with Deutsche Bank.

Yes, hi, I just wanted to follow up on this Imax versus [plasma]. Do you guys have an idea about which one would have better productivity?

Well, without a doubt, plasma immersion technology has better productivity than cluster boron technology, but that's not what the customers are also really mainly concerned about when they have evaluated plasma immersion in the past. It turns out that even pushing productivity aside, a lot of the other process issues that they have now uncovered - and, in fact, there are several papers that were presented at the IIT Conference, which was a major ion implantation conference in June. Several customers talked specifically about plasma immersion and the difficulty of things like contamination and the ability for the actual dopant to actually stay on the surface of the wafer. This is something called dose retention, and it's become the major processing concern for our customers.

If it were only about productivity, I think our customers would not only - wouldn't necessarily be interested in a lot of the cluster boron work that we've been doing. But it's interesting that all the DRAM manufacturers have been coming to us, talking more specifically about their needs and highlighting their concerns about plasma immersion. So I think time will tell with regards to this evaluation.

Okay, thank you.

And, ladies and gentlemen, that is all the time we have for questions today, and this does conclude the conference call today. Thank you for your participation.