科磊 (KLAC) 2007 Q1 法說會逐字稿

A very good afternoon, ladies and gentlemen. And welcome to the ICOS Q1 results 2007 conference call. (OPERATOR INSTRUCTIONS). As a reminder, ladies and gentlemen, this conference call is being recorded. And I would like to hand over to today's chairperson, Mr. Anton De Proft, CEO. Mr. De Proft, please begin your meeting, and I will be standing by.

Welcome everybody to our first quarter 2007 conference call. Let me first remind everyone that the conference call may contain projections or other forward-looking statements regarding future events or the future performance of the Company. These statements are only predictions and may change as time passes. We do not assume any obligation to update that information.

Actual events or results may differ materially from those projected, including as a result of changing industry and market trends, reduced amount for our products, the timely development of our new products and their adoption by the market, increased competition in the industry, price reductions, as well as -- due to risks identified in documents filed by the Company with the regulatory authorities.

After having said that, I will start by discussing our performance during the quarter, and I will comment on the outlook of our business. And after that I would be glad to take your questions, followed by some closing remarks.

As a preliminary note I would also remind you that the Company presents it financial statements as from this first quarter 2007 according to International Financial Reporting Standards, or IFRS. In light of this change, the Company prepared a reconciliation from U.S. GAAP to IFRS on the income statement balance sheets and cash flow accounts for the year 2006 on a quarterly basis. This information can be found on our website, www.ICOS.be.

Revenues for the three months ended March 31, 2007 were EUR19.2 million, representing an 11% decrease from the EUR21.5 million of the fourth quarter of 2006, and a 42.6% decrease from the EUR33.4 million reported a year earlier.

Operating profit for the first quarter was EUR604,000 compared to EUR0.1 million reported for the preceding quarter and EUR10.8 million for the first quarter of 2006.

Net profit for the first quarter was EUR1.6 million or EUR0.15 per share.

ICOS' revenue developed as expected in the first quarter with results impacted by diminished remounts amounts from Component Inspectors in a soft industry environment. On a positive note we received initial orders for our Wafer Inspector products from three new customers during the first quarter, and from two additional new customers since then. Those five first-time buyers in four months reflect the growing market acceptance of this new product family. We're continuing to gain market share in this high potential market where we are leveraging ICOS' inspection technology and expertise.

New customers, the first-time buyers, account for 10.8% of revenues during the first quarter of 2007. Those customers were spread over quite a few areas, U.S., Europe, Japan and also several countries in the rest of Asia -- and were are buying all products, Wafer Inspector components, inspectors and Solar Cell Inspectors.

During the first quarter we received several important customer awards. For the third consecutive year we resumed the Preferred Quality Supplier award from Intel for the year 2006. And also for the year 2006 we received the newly established World Qual Supplier Award from Spansion, a former joint venture between AMD and Fujitsu in memory application.

Then the sales of new products accounted for approximately 26.3% in the first quarter. These new products include mostly Wafer Inspectors and new variance of our Component Inspectors, for example, for memory card applications.

Consistent with our long-term policy of using periods of weak demand to continue to invest in future generation products, we kept R&D spending at roughly the same level as the previous quarter. During the first quarter our R&D work remained intense over all productlines. The highest absolute amount of R&D continues to be spent on our Component Inspector productline to improve the performance of the system, and to expand its market applications. Examples of such new applications include memory card and substrate. We believe that these newer applications will allow for the Component Inspector to grow faster than the overall market for back end equipment.

Another important R&D effort is pinned on our Wafer Inspectors productline. Our Wafer Inspector teams are very busy expanding the functionality and the speed of our WI-2000 and WI-3000 systems, as well as with numerous customer evaluations. One of the major development efforts is pinned on our 300 mm wafer handler which we inspect -- or expect rather, to introduce during the Semicon West show in San Francisco in July.

Finally, the third sizable of amount of R&D efforts is spent on solar cell inspection products. We see solar cells as one of our three strategic productlines, beside Component Inspectors and Wafer Inspectors. During the first quarter we have introduced a new high-speed version of the productline based on the same proprietary image processing boards that we used in our other products. Beside improving the speed, the use of one central image processing board significantly increases the synergies between our products and development efforts, and will allow us to develop more powerful products in a more cost-effective way. As a consequence we have also decided to transfer the R&D activities for solar cell inspection from Germany to Belgium. This will allow us to use maximum synergy. I will comeback to the reorganization of our German offices when we talk about our organization.

To conclude the comments on our R&D efforts, we're spending the remaining portion of our R&D on improving also the more generic technology that we need for future generation products.

Then the competitive situation, we continue to have a strong market share for our Component Inspector products, and with the introduction of our CIT-120 last year, we believe that we have further consolidated that position. In combination with our strong sales and support network and our flexible operational model, we believe that we continue to be very competitive in this market.

For the Wafer Inspector, we are competing with more established players in this market that, as expressed during previous calls, we believe to have very strong technology in this field. During the first quarter we received first-time orders from three customers, and then this month from another two. This compares with last year when we got four new customers for Wafer Inspectors during the whole year. Most of the new customers that ordered our Wafer Inspectors for the first time this year ordered competitive systems before and switched to our Wafer Inspector because of functionality, speed and support. These market share gains were realized during a period that the market was weak and further contracting.

As a result of this, the revenues currently generated by Wafer Inspector products are approximately 10% of our overall sales. For the whole of last year this percentage was roughly 3%. As I mentioned during previous calls to sales cycles for such complex equipment are very long, and we are only starting to see the traction of this productline. The ramp up of this product will continue during the rest of this year and into 2008.

I gave you an update on the patent infringement litigation with Scanner Technologies during the last call. At that moment I already mentioned that on January 31 we commenced a new action before The United States District Court, Southern District of New York. We have followed up with a motion for a preliminary injunction filed on March 14. In both those actions we're seeking preliminary and permanent injunction relief against Scanner to restrain them from claiming patent infringement against ICOS or its customers. The action also seeks a declaration that the Scanner patent portfolio is invalid because of lack of patentability, abuse of patent law and fraud on the Patent Office. It is unenforceable and not infringed. We are awaiting for the judge to respond in this matter. We are also waiting for the ruling of the judge in the original 2000 case, which was tried in March of 2005.

As I mentioned in the previous call, we believe that Scanner's threats and actions are totally baseless. We believe that Scanner has made wholly improper threats, and such conduct could in fact subject Scanner to liability in the United States and under that country's unfair competition law. It is our opinion that Scanner is grasping at straws and attempting to use the threat of the unknown to gain leverage, regardless of the legitimacy of their assertive position. We believe it is our duty and that of the industry to defend ourselves against these threats and actions by Scanner.

While ICOS considers its legal position to be sound, litigation is costly and time-consuming and success cannot be assured. If Scanner were to prevail, in its action against ICOS or ICOS' customers or users, it could obtain damages or injunction relief relating to VGAs and other electronic products imported into the U.S. And such customers would likely seek indemnity from ICOS. ICOS intends to continue vigorously to defend its business and its interest.

The organization, the total number of employees stood at 343 full-time equivalents at the end of the first quarter of 2007, the same level from year-end 2006. As I already indicated before, we have decided to consolidate our solar cell development activities in Belgium. This creates better synergy between our productlines and development groups, and will allow us to make more powerful product in a more efficient way. We are committed to remain the market leader in the field of solar cell inspection. And with this new organization we believe that we can further advance our products and consolidate our market leadership.

The German office will be downsized to a small group that concentrates on long-term technology development. We have made agreements with all the employees that we will let go, and have worked out a transition period. In essence this means that the first group of people will leave us at the end of June, and the second group at the end of the year. We have incurred approximately EUR50,000 in severance charges during the first one, and expect EUR160,000 severance charges in the second quarter.

During the first quarter we established a subsidiary in Taiwan also. With this action we consolidated the situation that we already had in place with a local distributor supported by a small ICOS team. There are no financial consequences.

We also further strengthened the Corporation with our offshore development center in India to expand our resources for software development. As we further need to expand our software capabilities, we believe that this center in India will allow us to react quickly to market requirements and to expand our software capabilities quickly in a flexible way.

Then the revenue broken down by productline, inspection systems accounted for 87% and inspection modules for 13% of first quarter revenues, compared to 83% of inspection systems and 17% of inspection modules for the fourth revenues of 2006. During the first quarter sales of all productlines decline, except for those of Wafer Inspectors, which essentially remain flat.

With the information that we currently possess we expect to see a more mixed picture with Component Inspectors to continue to go down somewhat, Wafer Inspectors remaining fairly flat, and Solar Cell Inspectors up from the first quarter. We remind you that these are only indications and that these may depend on individual orders, and can also vary rapidly. In addition, the product sales mix can also vary substantially from quarter to quarter.

Then the breakdown of the revenue per geographic area. During the first quarter we realized 73% of the turnover in Asia, of which 10% in Japan and 63% in other areas of Asia. Further 22% of our turnover was realized in Europe and 5% in the U.S. During the first quarter we saw our revenues decline in most areas, except South Korea, Japan and the U.S. where we saw up a rebound in our sales.

For the current quarter we expect to see a fairly mixed picture with our areas Singapore, Malaysia, Thailand, China and Japan to be increasing, and South Korea, Taiwan, U.S. and Europe to be decreasing. Those indications are also just indications at this moment and can change quickly.

Then the financial information for the first quarter 2007. On revenues of EUR19.2 million, we achieved a gross margin of 52%, slightly below our guidance. We see a combination of three elements resulting in this relatively low margin. First, the continuing weak market conditions and the higher fixed operational cost as a result of our Wafer Inspector productline. Two, the continuing unfavorable product mix. And three, the further decline of the dollar during the quarter. All these elements work together to influence the gross margin in a negative way. For the current quarter we expect those conditions to persist, and we expect that our gross margin will remain in the range of 51 to 54%.

Our net R&D expense in the fourth quarter amounted to EUR3.9 million or 20.3% of revenues. Our R&D expense is benefited in the first quarter from a grant of EUR165,000 compared to benefit from grants of EUR88,000 in the fourth quarter 2006. For the second quarter of 2006 we expect our R&D cost to remain approximately similar, with a similar grant, and also with costs in the range of EUR3.8 million to EUR4.0 million.

SG&A expenses decreased to EUR5.4 million compared to EUR5.7 million in the previous quarter. The decrease was mainly caused by lower commissions as a consequence of lower sales. For the second quarter we expect SG&A expenses to remain in the EUR5.4 million and EUR5.8 million arranged, including one time restructuring charge cost of approximately EUR200,000.

The operating profit for the fourth quarter was EUR604,000, up from EUR119,000 reported in the previous quarter. During the first quarter we realized a net financial income of EUR544,000 compared to EUR755,000 of net financial income for the quarter earlier.

The financial income of EUR860,000 of the first quarter included interest income of EUR455,000 of foreign currency exchange gains, and -- I'm sorry -- and foreign currency exchange gains of EUR405,000. The financial expenses of EUR316,000 of the first quarter included interest expenses of EUR62,000 and foreign currency exchange losses of EUR254,000. We expect the impact of our net currency exchange affect to remain limited during the next quarters.

We incurred a tax benefit of EUR419,000 compared to a tax benefit of EUR572,000 in the first quarter -- in the fourth quarter of 2006. As I indicated before, our tax rate can vary with our geographical mix of sales and manufacturing, and especially when compared to on a quarterly basis. And it is currently influenced positively by the Belgian tax credit. For the running quarter we expect to continue to see a tax rate below 10%. Consequently we realized net profit for the first quarter of 2006 of EUR1.6 million, or basic and diluted earnings per share of EUR0.15.

Then the cash flow information, the cash flow in the first quarter, defined as net income increased by non-cash items, was positive at EUR1.3 million, while changes in working capital and provisions used EUR3.2 million in cash, resulting in a net cash flow used in operating activities of EUR1.9 million. During the first quarter of 2007 we generated EUR398,000 from investing activity, and we used EUR3 million for financing activities.

These financing activities include the repurchase of owned shares, for which we received the authorization at the extraordinary general assembly of shareholders held on June 6, 2006. We repurchased during the first quarter of 2007 a total number of 91,640 shares for a total cash consideration of EUR2.9 million at an average of EUR29.95 per share.

Since the program has started we have now repurchased a total of 280,000 -- 282,876 shares. We will continue to repurchase our shares on a regular basis in 2006, and will request a renewal of the authorization for the repurchase of shares to our general assembly of shareholders to be held on May 8, 2007.

We now turn to the balance sheet. Cash balance stood at EUR56.2 million at the end of the first quarter, down from EUR60.7 million one quarter earlier. Accounts receivable increased to EUR22.1 million from EUR17.5 million at the end of the previous quarter. Days outstanding increased to 104 days at the end of the first quarter of 2007, up from 74 days at the end of the fourth quarter.

Inventories decreased to EUR22 million at the end of the first quarter of 2007 compared to an inventory level of EUR23 million at the end of the previous quarter. The inventory split was EUR7.5 million of raw materials, EUR10.0 million work in progress, and EUR4.5 million finished goods.

The stockholders equity decreased to EUR97.6 million at the end of the first quarter from EUR99.2 million at the end of the fourth quarter of 2006.

And then also on February 14 the Board of Directors decided to set up a stock option plan in which a total of 60,406 stock options were offered and accepted. The stock option plan will vest on February 20, 2008, and the options can be exercised over for a four and five-year period. The stock options serves a long-term incentive for worldwide executives of the Company.

And then the business outlook, where I want to start by saying that we feel very strongly about our future prospect. We have a strong leadership in the IC inspection market, with our Component Inspectors and are adding growth potential to this product line with applications such as memory cards and substrate. With our Wafer Inspector we are gaining traction in a market which we believe is at least the same size as our Component Inspector, and which opens further prospects into prominent applications.

And with our solar cell inspection modules we are the market leader in a rapidly growing niche market. We believe it is fair to say that we have very strong customer relations, witnessing the various prestigious awards that we continue to receive. And we have a flexible manufacturing environment that allows us to respond quickly to market changes. Finally, we have a strong balance sheet.

So we feel that we are well-prepared to reap the benefits from the rapid changes and the numerous opportunities that are merging in the packaging and interconnection field. Looking then at the immediate future, we continue to see weak market conditions. Most market analysts point to a market rebound in the second half of the year. And we also see the very first signs of a broader market recovery. However, we also see a weakening memory market, which in the very near term further weakens our market.

So as a consequence, and at this moment, our visibility remains limited to a few weeks. And our current view is that the second quarter revenues will be flat, or maybe even slightly down with respect to the first quarter.

That concludes my prepared remarks. I would now like to open the call to questions.

(OPERATOR INSTRUCTIONS) Wim Lewi.

I am Wim Lewi, Fortis Bank. Just some questions on your Wafer Inspector orders. Could you give an indication where they come from? Do they come from IDMs, foundries? And maybe also on your product categories where they come? You said already memory is weak. Are there any way related to Flash memory or any specific product category?

In fact, they are coming from a fairly broad group of customers. Geographically they are almost perfectly spread. There is U.S., there was Europe, there is Japan, there's other areas of Asia. Application or customer type, there's growth of IDMs and subcontractors. And as far as the application is concerned, it is also a fairly well mixed bed, I would say. There are semiconductors there. There is LEDs there. There is even printheads there -- processors. There is a various amount of -- it is a quite good spread geographically and customerwise.

I just wanted follow-up on that, actually related to the mix. Did you say that Wafer Inspector is flat, that means that we see still sequential pressure on your component inspection business, although lately, let's say the last couple of monthly, we saw the back end market rebound a little bit. How do you explain that kind of difference in what you experience versus the back end?

I have already hinted that in my prepared remarks the main reason for that, Wim, is that the memory market is actually weakening. And the memory market has been quite strong, and has held up quite well over the last couple of quarters, and that is now weakening. I have also said that we expanded into areas like memory card applications. And that these are -- that are now weakening a little bit. So it is a combination of these two.

We also see, as I said, the first very careful signs of a market -- a broader market recovery. But short term the memory markets are a little bit under pressure. And the combination of those two, very short term are indeed pushing the sales of Component Inspectors a little bit down.

There's no issue of replacement cycles, which might have been let's say stronger in the past versus now, as equipment installed in 2000 was replaced after five years -- five, six years -- and that is now kind of ending. That is not an issue.

No, not really.

Frits de Vries.

Frits de Vries, Rabo Securities. I have one question regarding the gross margin. It came out at 62%, a little bit below my expectations. You mentioned this primarily the extra cost for the Wafer Inspector and the U.S. dollar. Can you give us some color, what is kind of the effect of those two items and some other items in there? And perhaps looking further down the line, do you think in a few years time when the Wafer Inspector will ramp up that you can go back towards the 60% level?

Right. Yes, it is indeed a three year factor. At this moment to give you an idea, we have of course invested in the Wafer Inspector productlines in the production facility of that. So that means that our operation -- or our allocations from the fixed cost in manufacturing are rather high. They are actually above 6%. If you compare that with roughly a year ago or so, that is about double that it was. So that gives you an idea of the order of magnitude there.

The dollar I think we all know. I just looked at the average dollar rate with respect to the last quarter, then I think it is a little bit less than 2% that the dollar slipped. If you compare to a year ago, it is closer to 10%. Of course, there's also some hedging, and so -- but that is also a factor that comes into play.

And then the third thing is the unfavorable product mix where we are selling mostly -- and I want to make sure that I repeat that here. It is not a mix between, for instance, Component Inspectors and Wafer Inspectors, or solar cells, where we see roughly flat or similar margins. What we see though is that, for instance, within Component Inspectors the variety of the product increases. Also the spread of prices and margins increases. And we are -- most of the applications that are high runners, I would say, or that has held up quite well at this moment, are typically the lower end I would call them and the lower margin products.

Is that a function of the current soft market conditions or is there more structural elements in that?

The product mix is really more of the current market conditions. I can probably help you by saying where is the margin, or where do we expect the margins to go from here. Obviously, we can't predict what the dollar will do. And I would rather see the dollar strengthening than weakening. I think that is a fair statement.

But we do expect that as -- when the market recovers in the second half of the year, or whenever it happens, but that is the general consensus -- when the Wafer Inspector also picks up and so on, we believe that 55% should be the minimum. We will see where we go from there. So somewhere between 55 and 60, but I think 60 at this moment with where, for instance, the dollar is, I think that is a little bit too high. So but 55 or slightly above I think would be our longer-term estimate at this moment.

Can you give what has been the effect actually in Q1 of the U.S. dollar? Is that 1% or 2% on the gross margin?

You know, it is very difficult to exactly correct or calculate that. Because even if you for instance invoicing in euro, you still have competitors putting out quotes in dollars, of course. And so it is difficult then to say how much if for instance you have an order at a the little bit lower euro than before, it is hard to say how much of that effect comes from dollar pressure. But I think if we say it was close to 2%, I would. But again it is not really calculated, but I would say at least 1 percent then comes from the dollar, and probably even a little bit more.

On the Wafer Inspector, did I understand this correctly that the Wafer Inspector this year will contribute about 20% to total sales?

That is a very nice question.

I thought you said that.

Not really. I said at this moment we're running at a 7% rate. Where it will go, I did not give an indication. I gave the indication of course before that we expected to go up. But obviously that percentage would also depend on what the rest of the market does. If the rest of the market stayed flat or grows very aggressively, that obviously will also change this percentage. I did not give a comment for the future percentage.

Thank you. And congratulations with all the new orders for the Wafer Inspector. Bye-bye.

[Yogish Yadol].

Yogish Yadol, [Latimer Rsearch London]. I have a couple of questions. First, on Wafer Inspector, you said you have three new customers in the first quarter, and then you have another two customers in the start of the second quarter. If I understand correctly, this has nothing to do with the five new customers you announced before in the last quarter release.

And then you said that you're gaining market share in this high potential market. So I would like to have some details on your market share in the Wafer inspection and the total addressable market that you see here. And my last question is on the share buyback runrate into 2007. It would be really nice to have some detail on how many shares you expect to buy going into 2007.

Just one second. I'm answering the first part of your question. The customers, the five customers that we talked about now, these are new orders that we received since the first of the year. So these are indeed different from the comments that we made last time.

Then market share, while we don't release this information as we believe they are confidential, but I have indicated that both markets are about the same size. I have also indicated that about 10% currently of our sales comes from Wafer Inspectors. The majority comes from component -- the vast majority I should say -- comes from Component Inspectors, which obviously points you in the direction of where that market share is, which is still fairly low.

Right. Just building on this, if you imply 10% market share, and you had about -- just checking my model over here -- I'm just seeing the details of your Wafer Inspection for 2006. It was in the range of about EUR9.3 million. It is in my assumption on your market. So would this imply something around EUR90 million to EUR100 million market over there, which is obviously a little bit below component inspection? I'm just trying to understand how do you see it growing as large as the component inspection market?

I'm not going to comment on your specific numbers, but I think your reasoning in general terms is sound, and the orders of magnitude. You are right, I don't see any connections that you're making or anything that you there which is off the board, so to speak.

My last question was on the share buyback runrate for 2007, because you still have almost 800 shares to buy in 2007. Do you expect to buy the same rate as you have bought in this quarter?

We have a program, a share buyback program, which is in fact a fixed formula, which in essence -- we cannot give you the exact details because our bank commission doesn't allow that here. Because then it would become an offer, a public offer, and that is of course not --. But I can give you the general (inaudible). Roughly it is a fairly fixed amount of money that we use for repurchasing shares. Although we do vary that money a little bit in an automatic way, depending on the recent evaluation of shares.

But having said that, it means that you can expect roughly the same kind of amounts, although they may vary somewhat. We are -- and we do see this similar to for instance a development policy. It is really a policy that we have to on a continuous basis repurchase shares, and to invest in that way return some of the structural cash surpluses that we have and that we continue to generate -- to return them to shareholders. But in a way that we believe is more efficient than a dividend policy.

Thank you very much. If I can just ask you a small follow-up. In your balance sheet I see that your account receivables have increased substantially. I think this is a 26% increase sequentially. Can you explain what has happened here?

Yes. In fact, first of all I should say that last time they were really low. Our target there is to keep them below 90% -- 90 days rather. Last time they were rather low. Now they're indeed on the high side. But no particular reasons for that, except there's also some deferred revenue that also contributes to that. So whereas last time it happened to be on the low side, now it happens to be on the high side. But no real particular reason for it.

Steve Babureck.

Steve Babureck from Exane. Just another question regarding the wafer inspection business. You mentioned that you gained market share. What according to you do you think your added value is regarding your competitors? And what can you tell us regarding the pricing environment in this market?

This is a very, very interesting and a good and pertinent question that you say. But you really asking to give my competitor advantages here in a public forum, which in all honesty I obviously don't feel that comfortable with.

What I can say is that it is technically we believe -- and I will say one thing, we have more than 20 years of experience in image processing. And we believe that this image processing technology background that we have is giving us a specific advantage. And we believe that our technology it is really stronger, or at least very strong, in the industry. And it turns out to be also that our customers agree with that and are content that we have a superior technology.

Just a quick follow-up. Regarding your total addressable market targets for 2008, regarding the market share gains in the wafer inspection, do you think you could do better than the overall 50% that you already mentioned?

We will try. But let's be honest here, I think that is a nice target, a fair target we believe. And we will -- first of all we will try to achieve that, and then we will go from there.

Yogish Yadol.

In fact, I wanted to come back to your guidance for 2Q '07 and for 2007. I wanted to understand you are guiding us on the conditions in the market, on what you're hearing from your customers?

And second, I wanted to understand, you already talked about the weakening of the memory customers, but if you look at your leaders from most of the memory companies like Samsung, (inaudible) or other people, they have -- some of them have announced an increase in CapEx for 2007. And we are basically looking at about 17 to 18% CapEx jump in 2007 for the memory companies. In that situation how can you say that the memory product is weakening?

But I am of course talking on a quarterly basis, not on ua yearly basis. So the memory market is doing -- and I don't pretend to be a semiconductor specialist or analyst on memory here. So I'm talking on a quarterly basis. And at this moment it is indeed slowing down a little bit. I also did you say that it is collapsing and that we don't have a market anymore there. But the momentum in the memory market -- and I am of course talking about investment in capital equipment here, or what we can see from our customers is slowing somewhat. Whereas in the more general market we see a pipeline which is starting do fill. Although it is early, we do contend with the view that the market may be starting to recover in a broader sense.

When you say what are we using, is it general market conditions, or what our customers tell us. I am not surely what the difference is. We're not listening, if I may say it bluntly, to what other people say. We are listening to what we see and what we hear from our customers. So this is direct information, not something that we copy from an analyst or somebody else doing market research. This is firsthand information from what we see and hear directly from our customers.

I understand your intentions. Maybe just my final question on your 300 mm handler. Can you please give us some update on the progress? And you said that you're going to introduce the product in July. Have you already had any design wins for this product, or is it sampling with the customers? Any details would be really very much appreciated. Thank you very much.

I can't imagine that I'm not going to go there in all honestly. We will obviously announce in July and introduce at the Semicon West show. But I will refrain from making specific comments on specific wins, as we consider those too confidential, that kind of information.

Should we understand that you don't want to talk about them, but you have some design wins for this product?

You should understand that I don't want to make any specific comments on that.

Okay. No problem. Thank you very much.

Nico Melsens.

Nico Melsens, KBC Securities in Brussels. Good afternoon (inaudible). Just a quick follow-up in fact on the weakness you talked about in the memory market in your Component Inspector business. Could you just let's say in general terms characterize that market? I guess you have seen that before in your business. Is that a market that you would say is more volatile that sees shorter cycles that can change from month-to-month, or is it typically a market that takes quarters to recover as you would characterize, let's say, the total back end markets?

I'm pleased that you asked this kind of question to me. But as I said before, I really don't feel I am an expert or all that knowledgeable about these specific markets. I don't pretend to be a semiconductor market analyst.

I understand that, but have you seen that same kind of thing happening in fact in previous years or previous cycles? I'm just talking about your own experiences, your own (multiple speakers).

Well, memory, I think of you -- and I would almost say don't quote me on this, because again I'm not the real expert on this. But I think over time what we have seen is that the memory cycle is slightly decoupled and becoming over time more decoupled from the classical semiconductor cycle, as memory goes into all kinds of products.

But again, I really want to be very careful and not quoted on these comments. But if you look indeed at the last few quarters, and we saw the memory market was the strongest area of the overall market. And then especially for us that gave us an opportunity in applications like memory cards and so on.

And that is a factor now that that market is slowing down somewhat. And that is a little bit of counterweight, I guess, for a broader recovery. Which we again see the first signs of. But, well, I'm not sure about the exact expression in English, but one bird doesn't necessarily make the spring or the summer.

I understand. Fair enough. Thank you very much.

(OPERATOR INSTRUCTIONS). Mr. De Proft, we seem to have no further questions at this time. So I will hand the conference back to you for any closing comments.

I think we went through everything. And I would like to thank everybody for attending the call. And I am looking forward to seeing and hearing all of you back next quarter. Thank you very much.

Ladies and gentlemen, thank you very much for your participation. This concludes today's conference call. And you may now disconnect your lines. Thank you.