科林研發 (LRCX) 2003 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Lam Research March 2003 financial results conference call.

At this time, all participants are in a listen-only mode.

Following today's presentation, instructions will be given for the question and answer session.

If anyone needs assistance at any time during the conference, please press the star followed by the 0.

As a reminder, this conference is being recorded today, Wednesday, April 26, 2003.

I will now like to turn the conference over to Kathleen Vila, Director of Investor Relations and Corporate Communications.

Please go ahead, ma'am.

Thank you, Rob.

Good afternoon and thank you for joining us to discuss the financial results for the quarter ending March 30, 2003.

By now, you should have received a copy of today's press release, which was distributed by Business Wire at approximately 1:00 p.m.

Pacific daylight time and is posted on our website at www.lamrc.com.

Here today are James Bagley, Chairman and Chief Executive Officer and Mercedes Johnson, Chief Financial Officer.

Before we begin, you should know that except for historical information, the information Lam is about to provide and the questions Lam answers in this call may include certain forward-looking statements, including but not limited to statements that relate to the company's future revenue and operating expenses.

Management's plans and objectives for future operations and product development.

And the demand acceptance and competitiveness of the company's products.

These statements are subject to various risks, uncertainties and changes in conditions, significance, value and effect that could cause results to differ materially and in ways not readily foreseeable, and which are detailed in the company's SEC report.

We encourage you to read those reports in their entirety.

Lam would also like to disclaim any obligation to correct or update any of the information we're about to provide.

The call is scheduled to last for one hour.

Please limit questions to one per firm.

I will now turn the call over to Mercedes for a review of the financial results.

Thank you, Kathleen.

Good afternoon and thank you for being with us today.

Before we take a closer look at our financials for the March quarter, I wanted to review the goals we established for the company about two years ago.

One of our top priorities during this protracted downturn has been to transition the company to a more variable cost structure in order to improve our margin profile over the business cycle by outsourcing transaction-intensive activities.

Our target is to exceed the profitability ratios achieved during previous upturns and to remain profitable during downturns.

Last July, when we unveiled the post outsourcing financial model, we said that the objective during the down cycle was at $180 million in revenues to get gross margins up to or above 40% and control expenses so that the resulting operating profit would be essentially at break-even levels.

Over the past three quarters and particularly during March, our performance has shown we have begun to deliver to the letter and that we have built a strong foundation to enable the achievement of the former.

It is particularly important today because it allows us to respond more effectively to uncertainty in short-term global economic conditions.

With this in mind, let's walk through the numbers for the just-concluded quarter.

New orders of $192 million for the period represent a sequential increase of 18% above our expectations entering the quarter.

Every region exceeded the volume achieved in the previous quarter, most notably, North America.

For the geographic breakdown of new orders as well as revenue, please refer to the table provided in our press release issued today.

As we anticipated, demand for equipment coming from memory producers, declined to about 1/3 of total bookings with the rest evenly distributed between Seymour logic and foundry customers.

Just about half of our orders were for 300 millimeter fab and about 3/4 of the bookings will be utilized for sub-180 nanometer applications.

Production output for March was approximately $174 million and after management adjustments, our backlog stands at $233 million at quarter end.

Revenues were also above forecast at $187 million, a slight sequential increase.

Revenues rose most significantly in Europe.

Boosted by higher production output, gross margins rose to 40.2% of revenue as manufacturing utilization rates improved.

Ongoing operating expenses of $72.2 million increased modestly over the prior quarter but were lower than anticipated in January.

Prior number of working days were partially offset by cost reduction programs.

Ongoing operating profit was $3 million.

Other income was $2.1 million, mainly from net interest income on our investment portfolio.

As we announced in January, we continue to rationalize our real estate needs and employment levels in light of our outsourcing initiatives.

As a result, we recorded a net restructuring charge of $4 million to cover facilities closures and severance payments.

And our ending head count declined to approximately 2200 people worldwide.

Net income including restructuring items was $800,000 or 1 cent per diluted share.

I will conclude with a few comments on significant balance sheet changes from last December.

In the current environment of lower yielding investments, we have analyzed our midterm cash needs and concluded that a portion of our cash resources could be better utilized.

Consequently, and as we communicated over the last few weeks, we have repaid a $51 million long-term loan.

After this transaction, cash, short-term investments and restricted cash amount to $585 million, which include just over $20 million cash generated from operations during the quarter.

Additionally, we have increased the levels of collateral for some of our synthetic leases, bringing restricted cash up by $58 million.

Accounts receivable of $133 million resulted in days of sales outstanding of 65 days.

And inventories declined by $20 million to $127 million, yielding 3.5 turns.

Capital expenditures of $3 million continued to be kept at minimum and after depreciation of $9 million for the quarter, net fixed assets declined to $53 million.

Deferred revenue and profit were $87 and $47 million respectively at the end of March.

Let's move on now to Jim's comments.

Jim?

Thank you, Mercedes and good afternoon.

Mercedes' comments highlight the strong performance Lam employees continue to deliver in terms of managing expenses, reducing our overall costs and increasing our revenue potential by winning new etch customers and applications with technically superior products.

I commend our employees for their performance in all of these areas in the March quarter.

We exceeded our new order target, highlighting customer demand for our products and we are progressing on plan with several outsourcing initiatives.

Clearly this was a successful quarter for the company.

I want to expand some on Mercedes' comments about our variable cost structure and demonstrate the leverage in our business model.

If we increase revenues over our March results and do that in a similar product mix to the March results, the incremental revenue would yield incremental operating profit at about a 40% rate.

So, clearly, we have improved our basic cost structure.

This incremental revenue over a pretty substantial increase could be done with only a minimal increase in our head count.

Now, let me talk a little bit about our view of the market and how it's impacting Lam.

We're aware that there are many factors that could potentially impact the industry.

However, for Lam, we believe our market situation is improving substantively.

We're seeing more pull-ins than push-outs, more forecasted opportunities and fewer cancellations.

There are several bright spots in the industry as a whole, such as low inventory levels in the channels and the need to increase capacity for 130 and 110 nanometer applications.

Demand for next generation development systems for technologies below 110 nanometers continues.

The signs we are seeing are more positive than negative and point to a potential improvement in business conditions.

Now I will provide an update on Lam's market position.

We're very enthusiastic about our success in etch, particularly dielectric.

We're winning new dielectric applications at a compelling pace, which is reflected in the March bookings number.

New market share wins for the company are being driven by the exelan series of dielectric etchers.

We had a significant win in which we displaced one of our competitors with the critical front end applications at a leading customer in Asia Pacific.

This was the result of our ability to deliver the technical capabilities the customer required, that their incumbent supplier could not match.

Also, we have swept all dual damascene applications at a key customer in North America where we have been enjoying a strong market for us.

In recent customer visits, we had three customers tell us that there is no competitor that can match our performance on critical front end dielectric etch.

This market momentum is showing in our bookings.

In March, over 50% of our etch auditors were for exelan dielectric systems.

Lam is being recognized by major customers as the new leader in critical front end dielectric etch applications which complement our currently acknowledged leadership in dual damascene applications.

The change in our dielectric position is the result of our focus over the past four years on this market segment.

The progress that we have made in dielectric has not been at the expense of our market share in silicon etch.

We have continued to add capability to our 2300 Versys conductor system and have been selected by key customers for their 65 nanometer development activities.

Last quarter I noted that we would be shipping our next generation CMP system this quarter.

That shipment occurred today.

Now I'd like to conclude with the guidance for the June quarter.

We are forecasting flat new orders.

Revenue is expected to be between $185 and $190 million, gross margins will be 40%-plus.

Operating expenses will be up primarily as a result of more working days in the June quarter, profit after tax without restructuring charges is expected to be between $.01 and $.03 per share.

This is calculated using the tax rate of 25% and approximately 131 million shares.

We anticipate continued improvement in our asset management which will result in cash generation again in the June quarter.

With that I will turn the call over to the operator for questions.

Thank you, sir.

Ladies and gentlemen, at this time, we will begin the question and answer session.

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Our first question comes from Glen Yeung, please state your company name followed by your question.

Hi, Smith Barney.

Jim, a question for you on the guidance, you talked in the commentary about more positive signs than negative and yet your guidance was flat.

I wonder if there's conservatism there or perhaps if you could point to where you think some of the strength may emerge and when that may emerge.

Well, Glen, while our guidance is flat, we exceeded our expectations and guidance in the -- for the March quarter and we expect to see a continuation of that level of bookings.

I don't think that in the near-term we're going to see a dramatic improvement in the business, but I do believe that the signs are more positive than negative.

Over the past three quarters, in the -- in 2002, our -- I'm sorry, over all of 2002, our average bookings per quarter, I think, was 182, $183 million and we're already starting out well ahead of that in 2002.

So, if we look at our bookings being essentially equal in both first and second quarter, we're off to, I think, a reasonable start and that has to be more positive than what we were seeing in the 2002 time period, particularly as the business began to tail off rather dramatically in the last half of 2002.

Our next question comes from Suresh Balaraman.

Please state your company name followed by your question.

From Think Equity Partners.

Congratulations, guys, on the nice market share gains.

When I look at your depreciation expense on your fixed assets it looks like you'll probably have no depreciation expense in like six to eight quarters time frame.

And would that make such a huge impact on your gross margins?

How should we look at that?

I don't think that is accurate to say that in six quarters time we're not going to have depreciation.

The number that I quoted in terms of net fixed office is obviously a net number after depreciation, accumulated depreciation.

We have a variety of assets that go from little improvements to equipment and they have a youthful life that ranges anywhere from 3 to 7 years.

So, I think that you may expect to see the depreciation expenses very slowly decline over the next year or two but I don't think you're going to see them go away at all.

Thank you.

Our next question comes from John Pitzer.

Please say your company name followed by a question.

First Boston.

Jim, wonder if you can talk a little bit about the mix shift of the bookings for the June quarter from a geographic perspective?

North America looked like it was up pretty strong in the March time frame and Asia held in at pretty high levels.

Is there anything going on there and within that, can you talk a little bit about what you're seeing in Taiwan?

Thanks.

I don't think there's going to be a significant change in bookings.

The business is going to proceed pretty much the way it went in the last quarter.

So, I don't think there's a substantive change.

In Taiwan, I think there is some encouraging signs with TSMC expecting their utilization to be up in the June quarter and really discussions within the Taiwan community that they're going to have to increase their 130 nanometer copper capacity because they are running essentially at capacity and I don't think that is -- I think that's fairly well understood.

I think the one interesting thing that is possible is that we may see some 130 nanometer copper expansion at 200 millimeter rather than all at 300 millimeter.

Thank you.

Our next question comes from Brett Hodess.

Please state your company name followed by a question.

Hi, Jim, given the momentum you have in the marketplace right now, has this started to alleviate some of the pricing issues that we've seen over time?

And besides the pricing standpoint, can you give us an idea of -- besides -- excuse me, besides the pricing standpoint, can you give us an idea on the metal market, you comped in on the silicon market for etch where you're maintaining a dielectric market, but metal market share?

Let me answer the first question -- the last question first, on the metal markets -- our metal market position as we have been forecasting for some time, the metal business will decline slowly with time and I think that we're actually -- we're either holding share or gaining share, that depends upon the mix of 300 millimeter metal business we get where we have a very high share.

So, the poly business is still very good, we're holding, I believe we're holding our position in Poly, maybe even expanding it, particularly in 300 millimeter applications.

So, overall, I think our market share is fine.

Relative to pricing, with the announcements from some of the competitors in their financial performance and actions that they are taking, my expectation is people are going to focus on profitability, the focus is going to be on profitability, less on market share and the result will be, I believe, that the pricing could be more stable.

Our next question comes from Jim Covello.

Please state your company name followed by a question.

Goldman Sachs.

Congratulations on a solid quarter in a tough environment.

I hate to bring up this question, but can I ask about the impact that you're seeing from SARS on the business?

Thanks very much.

Quite frankly, other than the precautions that some of our customers are taking relative to visitors coming in the wafer fabs and asking our visitors where they have come from, we haven't seen any kind of impact from SARS that we can identify.

The business doesn't seem to be much different this quarter than it was last quarter other than in magnitude and I think the customers are beginning to show a little more positive view about the business overall.

I'm sure that those customers that are operating in a Shanghai, Singapore and to a lesser degree, Taiwan, are concerned about the potential impact on their wafer fab operations if there is a substantial outbreak.

I would remind everyone that while I'm not trying to downplay the seriousness of this problem, but the SARS outbreak are fairly limited in geography.

I think I saw on the news last night that there are 3400 cases in the world, primarily in Asia, there is only about 2.5 billion people in Asia.

So, you have a far better chance of being struck by lightning than you do by contacting SARS.

So, I just think that this is being overblown from the standpoint of what its impact on the business will be.

Thank you.

Our next question comes from Jay Deahna Please state your company name followed by a question.

The company is -- hi, sorry, the company is JP Morgan.

Good afternoon.

Jim, my question is do you guys have some sort of a new in situ strip capability with your dielectric etch products, either the exelan or 2300?

And if so, what type of impact do you think that has on your competitive positioning and the potentially eroding demand for stand-alone strip systems?

Thanks.

Well, we've had in situ strip for some time with exelan, as a matter of fact, what we recommend for our customers in all dual damascene applications that they do instiu strip, along with the other process steps that they do to accomplish either a trench or bia in the dual damascene process.

We have in situ strip as well as onboard strip in metal, instiu strip and onboard strip in our Poly etchers.

So, this is not something new.

I think that integrating multiple etch step for film stacks as well as the ability to remove the photo resist at the end of the process is a significant advantage in cycle time and cost for our customers.

There's a very healthy market in stand-alone strip, particularly after implant and after some etched steps where maybe the instiu processing doesn't buy you much in terms of cycle time or cost.

So, I'm not sure that this is going to change the stand-alone strip market very much.

Our next question comes from Kevin Vassily, please state your company name followed by a question.

Yeah, hi, Thomas Weisel Partners.

Quick question on the mix of business by customer type.

You mentioned about a third of the business came -- or the orders came from foundries.

When you say foundries, are you now including those foundries that are in China?

And would you put IBM in that category as you divvy up the order book?

Thanks.

While it may not be a completely logical nor clean classification, we consider IBM to be a IDM as opposed to a foundry.

We believe the preponderance of their business is in the integrated device manufacturing process.

Anyone that calls themselves a foundry, we put in the foundry categories, that would, of course, include companies in China.

Our next question comes from Shekhar Pramanick, please state your company name followed by a question.

Hi, Prudential Securities.

Jim, two questions, one, was there any backlog, what was the amount of backlog cancellation adjustment in the March quarter?

And then secondly, if 200 millimeter copper capacity is added is exelan at 200 for damascene etches equal to the damascene HPT capability of exelan 300 motor?

Let me answer your second part first, then I will let Mercedes answer the backlog adjustment.

The 2300 Exelan, which is our 300 millimeter dielectric system, has a process chamber that is in concept and pretty much in implementation, like the 200 millimeter exelan, there are obviously some differences because we have a larger process chamber for 300 millimeter than we do for the 200 millimeter, but to the untrained eye, everything would look essentially the same between the two systems.

The performance is very much the same.

The HPT, which is a specific version of the 200-millimeter Exelan has process performance that will match the 2300 Exelan 200 to 300 millimeter -- actually, 200 to 200 millimeter.

So, there is no difference.

The pricing is a little bit different, just as it is on all the 200 millimeter machines versus 300 millimeter machines.

But expansion at 200 millimeter or 300 millimeter for us is kind of a nonissue.

We are happy to have business in either category.

And Mercedes, you can answer the question on backlog.

Shekhar, as I have mentioned in earlier calls, we perform a risk assessment of our backlog, ending backlog, every quarter.

During the March quarter, there were no cancellations.

However, after our risk assessment, we have purged out of our backlog somewhere around $18 million worth of previously-booked business that we deemed at risk during the March quarter.

For a variety of different reasons which, as I mentioned before, can range from payment difficulties by some of your customers to the delays in the ship date in more than one occasion.

Thank you.

Our next question comes from Ted Berg.

Please state your company name followed by a question.

Company is Lehman Brothers.

Within that $18 million that was purged out of backlog, what types of customers were those, those D-ram or logic or foundry?

I don't think that it would be appropriate for to us comment on which kind of customers they were.

As I said, these are management judgments and I think that that is probably not appropriate.

Thank you, our next question from Mark Fitzgerald.

Please state your company name followed by a question.

Banc of America Securities.

Two-part question.

Can you give us some sense of the growth opportunity over the next 12 months and profitability picture for CMP?

And then secondly, I was looking at the Q2 to Q3 shipments being up but the deferred revenues being down, just curious what's going on there.

Let me answer the first question and I will let Mercedes struggle through the deferred revenue shipments morass and she can try to explain that to you.

As we said earlier that we were developing this next generation system, we would ship it in the second quarter and there would be a period of time for us to evaluate what this system success will be in the marketplace?

We have addressed many of the customer issues that the head on our 200 millimeter system and a lot of this revolves around the consumable set that we had at 200 millimeters compared to what we will introduce with this next generation system.

It will be certainly six months while we are evaluating the success of this system with the first couple of shipments.

I think it would be appropriate for us to discuss our outlook at that time rather than now because anything we say now would be so speculative I don't think it's worth the time or effort to go through it.

So, I think this will be a good question for the September quarter.

Let me address the question on deferred revenue.

Clearly over the last two or three quarters, our deferred revenue has come down in terms of absolute dollars.

And I think you can see a direct correlation between that and our ability to get equipment in production at our customer site and accepted by our customer on a faster cycle time than it had been when we initially lounged our fast qualification program, which we've spoken about for a number of quarters now.

So, as we become more and more efficient at getting installations done at our customer sites faster, you can continue to expect to see that the amount of revenue that turns into revenue in any given quarter -- or the relationship between shipments and revenue is beginning to get far closer to real-time revenue recognition as it was in the old days as we get faster and faster at getting equipment accepted in the field.

Thank you.

Our next question comes from Steven Pelayo.

Please state your company name followed by a question.

Great, two quick questions.

Jim, I don't know if I caught the shipment guidance for the fiscal fourth quarter.

Is that flat as well?

I'm curious how your deferred revenue is back logged next quarter.

And my next question was relative to your share gains in oxide, who's losing more?

Is it Tokyo Electron or Applied Materials, in your opinion?

On the shipment level, I'm sorry I just left that out.

The shipment level will be approximately flat.

We will run the factory at about the same rate we did this past quarter.

I think that it would be best for you to ask Applied and Tell whether they're losing market share rather than me comment on it.

Thank you.

Next we have a question from Raj Seth.

Please state your company name followed by a question.

Hi, thanks, SG Cowen.

Jim, can you comment on the breadth of the order book this quarter relevant to recent quarters and did you say that the June quarter order mix you expected to be consistent by customer type with the current quarter?

There may be -- and it depends upon the place of the order.

Let me, again, for some new people, I want to talk about our forecasting process.

We identify all of the business that we think has the potential to book in the next quarter.

That is for the customer to sign a purchase order with payment terms, with specs, with configuration of machines, et cetera, we have a very rigorous process by which we accept purchase orders.

We identify all of the business that we think we'll book.

It's always greater than what we give as guidance.

We judge it down in the aggregate as opposed to go through and judge any one piece of business out.

And the result is when someone says, well, is this in your forecast or not?

The answer is a lot of this business was in the initial roll-up, the judgment that is taken is taken for a variety of reasons and a variety of ways and we end up with a bookings forecast.

So, for us to go through and say exactly what is the constituency of the bookings forecast in June relative to what we actually achieved in March, again, we're applying judgment.

So, there may be a little more D-RAM business in the June forecast than was in the March actual and that's largely the result of the timing that people have expressed us in which -- or the time that they've expressed us that they will book the order.

So, as I look over the year and again looking at the potential business, it should book over the year, I think that D-RAM is going to be up above what we would normally expect it to be and I think that's largely driven by some capacity expansion but largely the spending by everyone to get to 110 nanometer capability.

So, I've said before that I think D-RAM business as a percent of capital expenditures should be under 25% for the industry.

It may be higher than that this year, which would probably mean it will be lower than that in 2004.

Thank you.

Our next question comes from Timothy O'curry.

Please state your company name followed by a question.

Deutsche Bank.

Thanks a lot.

Actually, I had a two-part question.

First of all, Mercedes, I wanted to ask about the synthetic leases, how much that's adding in terms of earnings?

And secondly, Jim, wanted to ask you it's interesting to note that your orders are now the second highest they've been since the peak of the cycle and nobody else is really anywhere close to that.

So, if you try to split that out, how much of that is because your customers happen to be ordering and how much of that is because of head-to-head market share wins?

I think the vast majority of it is market share because we are not, if you go back and look at say the peak or look back at 2000 and look at the ordering by major account, those accounts were we only had the largest market share, have been less aggressive in spending in the recent quarters.

So, you have to attribute the change to a change in market share.

And we know that the market share is higher because we know where we used to be and still are and where we weren't and are now.

So, I don't, you know, again, the conversation about who's losing market share should, I think, be -- that conversation should be held with the competitors and not with us.

We know where we have gained market share and I think it's beginning to show in the numbers, as you've pointed out.

Thank you.

And to answer your question on synthetic leases, we are expecting or anticipating a reduction on yearly costs for our synthetic leases of about a million dollars.

So, it's a number that is really not significant, however it adds to our profitability targets for the company.

Thank you.

Our next question comes from Nick Tishchenko , please state your company name followed by a question.

Good afternoon, this is Fulcrum.

Two short questions, please.

The first is about the 2300 platform, what are the current cycle times and were there any changes due to the restructuring of your business model recently?

And the second question to Jim, Jim, do you expect a meaningful increase in share of 200 millimeter related orders in the next couple of quarters?

On the 200 millimeter share, let me talk about that and next we're going have to ask me again, I'm not sure I understood about cycle -- if you're talking about lead time or cycle time.

I'm sorry, you need to explain that to me, but on the 200 millimeter, if customers are moving to 110 nanometer, let's give an example, a memory customer, we will show substantive market share gains because we're winning the critical front end applications at the 110 nanometer level, whether it's on 200 millimeter or 300 millimeter.

If it is on build amethyne, we will do well in dualed amethyne, probably not quite as good as we will on 300 millimeter or 200 millimeter, because those are installed with the dual amethyne system already, and I think our [INAUDIBLE] go in and convince the customer that they need to change their process flow to use our integrated processing capability probably doesn't have the same appeal as it will for someone building a new 200 or 300 millimeter facility because they already have an installed base of strippers and etchers that will perform what we do in an integrated fashion.

So, I think we'll do okay in critical applications, we'll do okay where the customer is expanding or converting a aluminum line to a copper line and at 200 millimeter, we will do good.

And please explain to me, again, what you are asking relative to the 2300 platform.

Oh, let's talk about lead times.

Oh, on lead times, the 2300, we've got that outsourced to the point that the lead times on it are as good as when we were manufacturing the alliance ourselves.

We've outsourced a lot of the alliance, we've outsourced the platform for the 2300.

I'd say the lead time overall for us is better than it was in the past because we've done a better job of designing the system for outsourcing and ease of manufacturing.

Thank you.

Our next question is from Michael O'Brien.

Please state your company name followed by a question.

Yes, from SoundView.

Just questions on first, Jim, your thoughts, it sounds like you still think the D-RAM projects that are out there are going to happen.

I know there's been a lot of chatter with -- where D-RAM prices are that people would pull back on some of those investments.

Are you seeing any signs of that?

And secondarily, you've talked about a lot more pull-ins and push-outs and better tone for your business.

Do you think in general the industry is seeing that?

Or is it just purely that you're executing much better than others?

Thanks.

Well, let's see, on the D-RAM projects, you know, the world is uncertain and we fought wars so that we can all have our own opinions and express them whether we're smart, dumb, right or wrong and my opinion on D-RAM is people have been trying to get to 110 nanometers are not going to delay the project because the price of the D-RAM is down.

They will accelerate the project because the price is down, that's the only way they can get their cost down.

It's an interesting situation, but I don't see how it makes any sense to postpone shrinking the dye size so you either process less wafers or process the same number of wafers and get more devices but you lower your cost.

And that appears to me to be something that the customers just can't back away from.

Now, if you're talking about a project where someone is adding new capacity and that may be more of a question, except, again, if they're adding the new capacity at 110 nanometers, what they will probably do is take their other capacity and devote it to a product that are not quite as sensitive to dye size as commodity D-RAMs would be.

Thank you.

Our next question comes from Gerry Fleming.

Please state your company name followed by a question.

Hi, this is Fahnestock & Co. Jim, another question about market share.

Last week, Data Quest came out with numbers showing that Tell and Applied had essentially caught you in market share and the etch market.

I wonder if you could tell us how you see your market share breaking down in oxide metal and Poly versus your average?

Well, I think if you look at the Data Quest numbers, the Data Quest numbers are a reasonable representation of what the market share is.

Data Quest went through a very elaborate explanation, but I'm assuming with - on the information they sent to you, that explained why our market share was probably inflated in 2001 as opposed to where now, since they count revenue, our market share is probably being hindered by the fact that we have a different revenue recognition practice than our competitors.

So, I think you ought to forget about 2001, look at 2002 and I think that probably gives you a better representation of what's gone on because the major effect of the change in revenue recognition has been kind of washed out although I think we're still at a little bit of a disadvantage, but it will be an advantage for us later in time as the business declines.

So, I can't -- I mean -- so, what it is is what it is.

They report on revenue and that's fine with us.

We'll just deal with it.

But their breakout on market share are, I think, are reasonable.

Before we take the next question, I forgot, Mike asked me another question and had to do with our outlook for the industry and did I think the industry is getting better or is this Lam-specific?

I think it's both.

I think that the situation has stabilized.

The industry may be getting a little bit better, Lord knows that anything could happen tomorrow and the business could get worse.

We're not -- you can't forecast that.

But, for us, within the markets that are out there, we think our business process -- prospects are somewhat better than they have been in the past and that's largely the result of our market share at 110 nanometer, our market share at copper at 139 a nanometer.

Our market share in Poly and in silicon etch.

So, I think we're just doing quite well in the etch marketplace and it's incumbent upon us to take this same success and begin to focus enough attention on CMP to make CMP the same level of success that we're seeing in etch.

Thank you.

Our next question comes from Byron Walker, please state your company name followed by a question.

Good afternoon, Byron Walker, UBS Warburg.

Jim, how many 10% customers, revenue customers, did you have during the quarter?

And what are you projecting for 10%-plus customers in terms of just quantities in the current quarter?

Trying to get a feel for breadth of your business.

We have never given out, other than when we file our 10K, who is 10% of our revenue in any quarter.

And so -- and we do that only on an annual basis and I don't see any point in us giving that out on a quarterly basis because I don't think it has a big impact on the business.

We are not highly-concentrated on one or two customers.

I've answered the question in that fashion.

Thank you.

Our next question is a follow-up question from Glen Yeung, please go ahead, sir.

Jim, I think I heard you mentioned that there was some share gain in the Asia Pacific region I wonder if there's share gain in any other region?

And are there any anticipated in the near-term?

Well, I think in Europe we're probably flat in share, but we have very high share in Europe, that the people who are headquartered in Europe, I will talk about where they're headquartered, where we obviously don't have a high share in Intel in there in Europe, but for headquartered companies in Europe, our share is about flat.

It would be very difficult for to us gain share, although we are focused on one customer where our share is below what we think is our God-given right and so we're working hard to correct that anomaly.

In North America, our share is low and it's principally because two major logic companies have minimal business with us but those companies where we are doing business, we have very high share.

In Japan, our share is low.

In the rest of Asia Pacific, Korea, Taiwan, China and Singapore, our share represents, again, about what we're doing on a major customer basis.

So the area for us to work in order to increase our market share, is in Japan and on a couple of customers in North America.

Thank you.

Our next question comes from John Pitzer.

Please go ahead, sir.

Just two quick questions, Jim.

Bookings at 300 millimeter, what's 300 millimeter running as a percent of shipments?

And you talked about the next generation CMP tool shipping can you just give us an update on what the differential is between the new tool and the last generation?

Thanks.

On revenue for 300 millimeter -- oh, I thought you asked for revenue on 300 millimeter; that what you asked?

Oh, let's see, answer the question...

I think that we said that 300 millimeter bookings were about half of our orders and that's about the same for shipments there.

Isn't that much difference.

It will vary a little bit quarter-to-quarter depending upon when the delivery time is, but there's not much difference.

And what's the other question?

I don't know -- we can go to the next question.

Does that answer all your questions, sir?

Hello.

Yes.

Yeah, can you talk about what your tax rate would be for next year?

Next fiscal year, that is.

We are projecting a 25% tax rate for this fiscal year which ends in the June quarter.

At the moment, we have not completed the analysis for us to be able to provide you with a tax rate for next year.

So, for the moment I will continue to use what we have had in the past, although this is, for your modeling purposes, but then certainly not a confirmed number at this point.

Before we take the next question, John, you had asked and I forgot to answer it, the difference between the next generation CMP and the one we currently have.

The next generation CMP uses all the software out of the 2300 etch, uses the same front end so that the automation and operator interface is all the same for the new CMP as it is on the etch so we get a lot of commonality on parts and we believe that will reduce our costs.

I've had a different cleaner in it and it uses basically the same technology but we believe it's substantially improved from what we had in the current systems and we know that our current system does a very good job of cleaning.

There have been other changes to simplify the system, keep the footprint contained and it's easily convertible from 200 to 300 millimeters.

Thank you, that is all the time we have for today's conference call.

We'd like to thank you again for joining us and we look forward to giving you an update next quarter.

Thank you.

Ladies and gentlemen this concludes the Lam Research March 2003 financial results conference call.

If you'd like to listen to a replay of today's conference call you may dial 303-590-3000 with access code 532143.

You may now disconnect.