萬機儀器 (MKSI) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the MKS third-quarter earnings call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session, and instructions will be given at that time.

(Operator Instructions).

As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Seth Bagshaw, Vice President and Chief Financial Officer. Please go ahead.

Good morning, everyone. I am Seth Bagshaw, Vice President and Chief Financial Officer, and I'm joined this morning by Leo Berlinghieri, Chief Executive Officer and President. Thank you for joining our earnings conference call.

Yesterday after market closed, we released our financial results for the third quarter of 2011. You can access this release on our website at www.mksinstruments.com. As a reminder, the various remarks we may make about future expectations, plans and prospects for MKS constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those discussed in yesterday's press release, and the Company's most recent annual report on Form 10-K, and most recent quarterly report on Form 10-Q, which are on file with the SEC. These forward-looking statements represent the Company's expectations only as of today.

While the Company may elect to update these forward-looking statements, it specifically disclaims any obligation to do so. Any forward-looking statements should not be relied upon as representing the Company's estimates or views as of any date subsequent to today. Now I'll turn the call over to Leo.

Thanks, Seth. Good morning, everyone, and thank you for joining us on the call today. I will give a recap of the third quarter, as well as our outlook. Then Seth will go through our quarterly results and guidance, and then we will open the call for your questions.

Sales for the third quarter were $194.5 million, down 13% from the second quarter. Sales to the semiconductor market were down 20% sequentially, compared to a very strong Q2, and totaled $115.6 million, or 59% of revenue. Consistent with our strategy to grow and diversify our business, sales to all other markets were 41% of total Q3 sales at $79 million, unchanged from Q2. In Q3, non-GAAP net income was $30.6 million, or $0.58 per share. GAAP net income was $30.4 million, or $0.57 per share. Our cash and short and long-term investments net of debt increased $32.9 million in the quarter to $534 million.

The industry softening that we reported in the second quarter has continued to impact the global semiconductor supply chain. World-wide economic headwinds and slower consumer spending have resulted in lower electronics demand, rising chip inventories, and a slowing of investments in semiconductor production capacity for the second half of this year. This means that our OEM equipment customers have seen their order rates decline notably, and therefore have slowed the rate at which they are ordering from us. Our sales to OEMs decreased 26% sequentially in the third quarter.

While there is currently a wide range of estimates for semiconductor industry capital spending for 2012, the outlook for next year should become clearer by the end of January, when the leading chip companies which drive the majority of investment, will have formally announced their CapEx plans. Until then, we will continue to execute on our business model, which enables us to rapidly adjust to changing conditions with a focus on consistent cash generation, careful cost control, and flexible manufacturing.

Industry analysts disagree on the timing of a recovery, but there is general agreement that this slowdown should be temporary, and that semiconductors continue to be essential to the technologies that enable today's lifestyle. The demand for more economical, smaller and more powerful chips continues to drive development and investment, even in a downturn. As I have mentioned in past calls, shrinking chip geometries open additional opportunities for MKS. Smaller geometries require additional process steps and more equipment. And as geometries get smaller, and chip layers get even thinner, there is a need for additional control of the tool and it's interconnected subsystems.

Our wide range of critical technologies is a real plus, as OEMs address the challenges of leading edge production. And in the quarter, we had successful new OEM design wins on a number of our technologies, including chamber clean, pressure, vacuum, valves, heaters, manifolds and controls. Sales made to the semiconductor device makers increased slightly in the quarter, with continued orders for gas analysis and other technologies, as these fabs continued installation, startup, and optimization of new tools. Despite the slowdown, semiconductor OEMs are continuing to enhance their technology to support the industry's road map for increased performance at lower cost.

Today our customers are working on tools for more complex, yet more economical chip production through smaller critical geometries, as well as more chips per wafer. Getting additional chips on a wafer is more than just shrinking the chip. It is also about increasing wafer size to maximize manufacturing investment. And to address this, our customers have recently started to work on tools for 450 millimeter wafers.

Just as we witnessed in the transition from 200 to 300 millimeter, larger wafers require more control. We believe our experience with large display and solar cell tools have given us an understanding of some of the challenges of processing larger substrates. And today, across all our technologies, we have multiple active engagements with our semiconductor OEM customers as they start to design new 450 millimeter tools.

To augment our revenue growth and counterbalance the cyclicality of the semiconductor market, our ongoing strategy is to target and gain share in other cutting-edge and growing markets, which like semiconductors, have production processes that require high precision, utilize vacuum and gases, and need a sophisticated level of instrumentation and control. These markets include solar cells, light-emitting diodes, thin coatings, drug development and production, medical, environmental and other critical applications.

While the long-term growth estimates for these markets are excellent, we anticipate that growth rates will differ year to year. As we all understand, the solar cell market has moderated this year, due to supply demand imbalance. And the LED market is still absorbing record tool shipments made over the last 18 months. This has impacted our year-over-year revenue growth from these markets, while sales to other industries continue to increase, in line with our growth objectives. Our long-term goal continues to be to realize a compounded annual growth rate of at least 15% in these advanced markets and we have successfully demonstrated this growth for nearly a decade.

As with other calls, I'd once again like to give a few examples of our successes in these markets. Starting with solar, as I mentioned on the last call, the market is absorbing record capacity additions while working through large solar cell inventories. As a consequence, this market has slowed, and our third quarter sales to the solar market were down 14.5% to $11.5 million. The large order from a major Chinese solar customer which was to ship in the second half of 2011, is now delayed into 2012.

However, as we stated in the last call, even with the solar market slowing down and the reschedule of this China solar shipment, we anticipate that we will significantly exceed our 2010 solar sales, reaching a new record for solar sales and 2011. We continue to be positive about the long-term opportunity in solar, and are working with new and existing solar OEMs to achieve additional design wins every quarter. Such as the selection of our new digital mass flow controllers by a Chinese solar OEM, and the design-in of our chamber cleaning generators at another solar OEM.

For all other markets, our Q3 sales were $67.4 million, up 2% sequentially and representing 35% of total sales. Combined sales into these markets remain strong, as we continue our concentration on new and existing opportunities, including bio pharm, medical and life sciences, environmental, and number of other industrial markets. In the life science area, we recently acquired General Electric's ozone product line. The acquisition increases our ozone offering, as well as our market opportunity for water treatment in the pharmaceutical, industrial and food and beverage industries. It also positions MKS as a key supplier for ozone technology to GE. It increases our customer's options for green, and less expensive water treatment solutions.

In the environmental market, we continue to have success with our emissions and gas analyzers. And once again, we added new customers for emissions monitoring, and engine improvement and testing. Each quarter, we also see additional acceptance of our AIRGARD analyzer, which monitors the composition of ambient air to identify and alarm for hazardous gases in municipal and civic spaces. I'm happy to report that after successful testing, we received another order this quarter for our AIRGARD monitoring technology which was selected to secure a key government location.

In drug development and production, we continue to see success with our multivariate analysis software, which is used to analyze the production process to control drug quality and consistency. In the third quarter, a leading global drug company placed an additional order for our analysis software, launching a second project which will increase multivariate software use, as well as increase the scope of data analyzed to continue to optimize their drug production. This represents just a sample of our continuing success in new applications in markets, which validate our ability to execute our growth strategy.

Looking ahead to the fourth quarter, we expect the uncertainty of the global economy, and the softening of the semiconductor market will continue. Order level started to decline in May, and continued to decline until the middle of Q3. However, since then orders have remained relatively stable. Given this, we anticipate the sales in Q4 may range from $145 million to $165 million. And at these volumes, our net income and non-GAAP net earnings could range from $0.18 to $0.31 per share. At this point, I will turn the call over to Seth, to discuss our results and to expand on our guidance.

Thank you, Leo, and good morning again, everyone. Revenue for the quarter was $194.5 million, a sequential decline of 13.4% compared to Q2 revenue of $224.5 million, and a 12.1% decline from $221.3 million a year ago. Gross margin was 45.1%, down 1.7 percentage points in the second quarter, [due] to primarily to lower sales volumes. During the quarter, we saw that business activity was continuing to moderate, we implemented reductions in certain discretionary spending areas, and also in variable compensation. As a result, operating expenses decreased by $1.1 million, and were $46.3 million, compared to $47.4 million in the second quarter of 2011.

Our net operating profit margin was 21.1% of sales. Non-GAAP earnings were $30.6 million or $0.58 per share, compared to a record $38.8 million in the second quarter, and $36.8 million in the third quarter of 2010. GAAP net income was $30.4 million or $0.57 per share. The tax rate for the quarter was 26.6%, which was lower than our expected full-year tax rate of 32%, due to the change in geographical mix of taxable income, and the impact of certain tax incentives recognized in the quarter. Our normalized tax rate in the fourth quarter is expected to be 32%.

Now turning to the balance sheet. Cash and investments net of debt increased by $32.9 million to $533.8 million. Total book value net of goodwill and intangibles increased by $23.5 million to $831.2 million. In terms of working capital, days sales outstanding were 59 days, which improved from 61 days in the second quarter, due to the geographical mix of customer receivables. And inventory turns were 2.7, compared to 2.9 and Q2. Total working capital increased by $19.7 million to $767.4 million.

Regarding cash flows for the quarter, our cash flow from operations was $45.9 million. Capital additions for the quarter primarily related to test and calibration equipment were $3.4 million. Depreciation expense was $3 million, and non-cash stock compensation was $2.5 million. During the quarter, we also paid a cash dividend of $7.9 million or $0.15 per share.

On July 25, the Board of Directors authorized the Company to repurchase up to $200 million of our common stock. As we stated in the press release, the timing and quantity of any shares repurchased will depend upon a variety of factors, including business conditions, stock market conditions, and business development activities, including and not limited to merger and acquisition opportunities. These repurchases may be suspended or discontinued at any time without prior notice. We initiated the program late in the third quarter, and completed the purchase of approximately 22,000 shares for $475,000, at an average price of $21.80 per share.

Now I will go through more detail, regarding the composition of revenue for the third quarter. Sales to the semiconductor market were $115.6 million, down 20% compared to the second quarter, and represented 59% of third quarter revenue. Within the semiconductor market, sales to semiconductor OEMs were down 26%, and comprised 44% of total sales. Sales to semiconductor fabs were up 2% in the quarter, and comprised 15% of total sales. Sales to the other advanced markets remained consistent with the second quarter of 2011 at $78.9 million, representing 41% of total revenue.

Geographically, sales in the US were 46% of total sales. Sales in Asia were 39%, and sales in Europe were 15%. Sales to our top 10 customers represented 39% of total sales. Sales to our largest customer, Applied Materials, represented 12% of third quarter sales. Our head count at September 30 decreased to 2,591, compared to 2,740 as of June 30, primary reflecting a decrease in manufacturing headcount as production volumes declined, and completion of this year's summer intern program.

Now turning to Q4 guidance. Based upon current business levels, we estimate that our sales in the fourth quarter could range from $145 million to $165 million. Based upon this expected sales range, our Q4 gross margin could range from 41% to 42.5%, reflecting the lower volumes and expected quarterly product mix. Q4 operating expenses are expected to range from $45 million to $46.2 million. In the fourth quarter, R&D expenses could range from $14.3 million to $14.7 million, and SG&A expenses could range from $30.7 million to $31.5 million.

The range of operating expenses reflects decreased spending due to lower expected revenue volumes, but also includes continued investments of certain key IT and [research] and development projects. As I mentioned in previous calls, the timing of these projects is dependent upon a variety of factors, and could vary from quarter to quarter. Amortization of intangible assets and net interest income for the fourth quarter are both estimated to be approximately $300,000. We expect our fourth quarter income tax rate could be approximately 32%, reflecting the anticipated geographic mix of taxable income.

And given these assumptions, fourth quarter non-GAAP net earnings could range from $9.5 million to $16.4 million or $0.18 to $0.31 per share on approximately 53 million shares outstanding. GAAP net income in the fourth quarter could range from $9.3 million to $16.2 million or $0.18 to $0.31 per share. As Leo mentioned, we expect that the uncertainty in the global economy, and the softening of the semiconductor market will continue to impact our business this quarter. Therefore, so far in the fourth quarter, we conducted a loss reduction of both direct employees and temporary workforce. We've also announced shutdowns for the fourth quarter for US employees, reduced work weeks and overtime at other manufacturing sites. We will continue to review and control discretionary spending.

As Leo also mentioned, industry forecasts may become clearer when major device manufacturers announce their capital spending plans for 2012 early next year. With this in mind, as well as our growth initiatives in other advanced markets, we feel that the current level of operating and manufacturing resources will allow us to both retain our flexibility, and to continue to focus on our long-term customer commitments and other projects. However, we continue to moderate expenses, and should business levels fluctuate, we have the ability to adjust discretionary and variable costs accordingly.

This concludes our prepared remarks. We now open the call to questions.

(Operator Instructions).

C. J. Muse of Barclays.

Thank you for taking my question. I guess the first question, revenue guide, at the midpoint is down about 20%. I was hoping you could talk about what you are seeing at the OEMs, chip makers and non-semi to come up with that number?

Okay. Thanks, C. J. for the question. I think you can pretty much assume the majority of the decrease is in semi. We are expecting a relatively stable revenue from the non-semi businesses. And it's based on what we saw in the last 5 or 6 weeks of the last quarter till now, and the expectation. So things have stabilized, it reflects that.

Okay. That's helpful. I guess looking at 2011 and then 2012, there is this clear consternation on spending around the LCD, LED, the solar front. So can you give us an idea of what those 3 divisions could do to revenues in calendar 2011, and what kind of down tick we should anticipate in calendar 2012?

Well, we have not seen all the forecasts yet. And you know, and they change by the month. But we still believe that there is inventory being worked off on the solar cell production, and panels. And LED, with the record shipments that were made over the last 18 months. I'm not sure exactly when that gets turned around, but we know it will. And LCD, it is a smaller piece of our business today, but I don't have any color that I can add to that. I think that we are still expecting that solar business will be robust, because of new customers that we keep getting. And that is when we have been able to prove, including this year, where the solar industry has been down significantly, but we have been able to grow our business. We'll have to take a look at it as we get towards the end of the year, and get maybe a clearer picture on it -- at least the first quarter, and maybe the second quarter, and be able to add more color on it in the future.

Just a follow-up, on the solar side. I believe your latest guidance was somewhere between $70 million and $80 million. Is that still intact for calendar 2011?

That's -- I don't know if we ever gave a number of guidance. But we will exceed last year's revenue number. And I think last year was 60, close to 60.

Yes.

So I think that -- we'll -- you're not too far off on that lower number probably.

And you expect that new customers will enable that business to hold at least flat in calendar 2012, or -- (Multiple speakers).

I didn't say that. You said that. (Laughter). I said, we will know more I think, as time goes on. Again with the turns business -- and the solar business, I have mentioned the last couple years, is really lumpy, in the sense of because end users also buy significant amounts from us. Or they have tools made by contractors in some cases.

It's not so much rate-based, like the semi OEMs tend to get into rate. And that rate varies, by where we are in different cycles. In solar, it can vary just because of a funding of a project. And so -- or the -- when the mortar and bricks are complete, get tools into a fab. And so, I think there's just more lumpiness to it. It's harder for us to put our hands around what is going to happen, way out in the future when we're looking at, what is going to happen this quarter. So I think -- as we go through the next quarter, we'll probably give you a little more color, at least what we see, as we get into 2012.

Okay. And last question for me. Given the floods going on in Thailand and the implications to the HDD world, can you talk about any conversations you have had in the last few days, in terms of your data storage business? And whether you are seeing any signs of, I guess growth there, and what that could mean over the next few quarters for you guys?

Yes. Nothing in the most recent time. Nothing in the last week or so, we've had any updates on that. I expect we will know more, again, over the next month or 2. It's just when other disasters or problems have happened, it's not been something, that it's been clear immediately.

Very helpful. Thank you.

-- a lot speculation, I am not going to comment on speculation.

Sure.

Thanks.

Our next question comes from Edwin Mok of Needham & Company. Please go ahead.

Hi, thanks. Leo, I just want to clarify one thing. You said that the [lows] have declined sequentially from the third to the fourth quarter as come from semi. And if I take your semi business [aid] in the third quarter, that would imply that like -- the semi is down around 50%? Did I get that number incorrect, or is my math totally messed up?

Yes, that is right, Edwin. In Q3, semi, $116 million. Midpoint of guidance in Q4, $155 million. The other advanced markets have been relatively steady last several quarters, about $79 million. So if we assume, it stayed relatively flat in Q4 for assumption purposes, that puts the semi down about 45% in Q4.

That's great.

Yes.

Yes, I just wanted to clarify that. So can I ask you one question regarding kind of your customer on the semi side, your customer consumption versus what you guys are shipping? Do you think that you are actually shipping below what they're actually using? Are they actively working down inventories, that's why numbers are being held, orders are being cut so aggressively?

Yes, we have our opinion on that. I think from past experience in, and when business is going up -- I keep mentioning this -- that they're usually building their [whip] inventory. And when their order rates go down, they size their inventory, by consuming it. So I think we believe that some of -- we would see some inventory consumption going on, that we are not going to see all of the demand from what they're building, that they would have some reduction in inventory. That would be our normal expectation. When things recover, we would expect that we would see more than the normal shipments and consumption, because they would have to build some tools on the floor. I think that's -- it's our view of it, I think it is fairly accurate.

One thing that I have said is, the timing of it is impossible to know exactly, because we have so many customers, with so many different part numbers, with so many different inventory positions. But in general, when things are slower, they have less tools and less inventory in their manufacturing pipeline. And the way that happens, is by consuming more inventory. When things go up, they end up putting more in the pipeline. So I believe there is some inventory adjustments.

Great. Very helpful there. And then for the chip makers, you mentioned that, this has actually grew a little bit on the last quarter. So I'm wondering what is the driver behind that, and do you expect that trend to continue?

Yes. Well, I think that one of the things -- as the chip makers -- I mean they are still working on smaller geometries. And they tend to add capacity, even as things slow down in some of these key areas, looking at ways to reduce costs. But the things that -- the products that we sell directly to them, often enhance their productivity. And so it may reduce how fast they need another piece of equipment, or it may enhance the yield of a process.

So they are still making investments in those. And often, those pieces of capital that we sell -- and sometimes it's service-related. But the pieces of capital that we sell directly to them, often those are done after they get the tools in, and installed and running. So it is not as if, they come in simultaneously. Usually they get the tools up and running, and they would add these pieces, and we would help them integrate them, onto their tools. So they would be added sensors or controls to enhance their processes.

I think that's why we saw that continue. It's not clear what -- how long that continues. There's always some impact eventually, if they slow down spending significantly. If what we are hearing from our OEM customers, is that they are somewhat positive out a little bit from now, then maybe they don't curve that kind of spending. So we will have to see. But we are not saying, that is going back up again. But we would see that less variable, than the OEM business obviously.

Great. That's very helpful. And thanks for that squeezing in that OEM (inaudible) --

Edwin, I just want to clarify one comment, I made a minute ago. So from Q2 peak, semi to -- if we assume a mid point Q4, if all the decrease is in semi, it is about a 47% decrease from Q2 to Q4. Q3 to Q4, sequential, about 35%, and that could range a little bit. Just wanted to clarify that for you.

Great, thanks. That's helpful. And then lastly, just on the LED space. Can you remind us what is your exposure there? And as we move forward, I think you've mentioned in your prepared remarks, that you might -- thought to see some slow down there? Do you expect that you can grow your exposure, or how do you kind of think about that?

Well, I think what we mentioned is, certainly there have been record tools shipped, and things have slowed down, I think as a result of absorbing all of the record tool shipments. We -- one of the things that we have commented on I think pretty regularly in the last few calls, or at least the last 2 or 3 calls, is that we keep picking up additional customers for LED. And I know there are -- sort of the market leaders that have a percentage of the business, but there are a lot of both Asian and other customers in other geographies that have come into this LED market, equipment people and end users who build their own equipment. So we keep adding to that base. And so, one of the ways we can help reduce that exposure, at least to the market leaders that are probably going to see the impact the most, is keep working on getting more design wins in that space.

Ordinarily, we would expect to get more content on second-tier OEMs, because that is what typically happens. They have less ability to source, we have a broad portfolio of technology. And one way they can engage with us to a higher level and get good support, is to buy more from us. So typically we would expect to get more content on the second tiers OEMs. And so in LED, we've done that in semi, we've done that in solar. We would expect that to continue in LED. So that would help some of the exposure, it's not going to take it away.

Great. That was actually a very good point. Thanks. That's all I have. Thank you.

You're welcome. Thank you.

Krish Sankar of Bank of America Merrill Lynch.

Thanks for taking my question. Leo, a couple of them, in your prepared comments, you said that the order rates kind of stabilized after August. And so pretty much, September, October levels, have been pretty, I guess stable. But if you look at what Lam said yesterday, they said, somewhere in mid-September, they started seeing memory-related push outs. So I'm trying to reconcile the 2. Is that something that you've baked in your guidance, or is this something that is going to come down the line?

What I said earlier, in the first question I think that was asked, was that the guidance that we have given -- we have seen stability -- we have seen it decline throughout Q3, until about the middle of Q3. Then we saw, to me, a very stable order rate. And that has continued until now. So we have based our guidance, on what we are hearing from customers, and also expectation of that stability.

Got it. All right. And then if I look at your Q4 guidance, is there -- do you guys have an idea of what the mix of the OEM sales would be?

I don't think it varies tremendously from quarter to quarter. So -- of the semiconductor portion, I don't know. Maybe -- we would be splitting hairs here, but it might be a percent or two difference. But I don't think that it varies that much from quarter to quarter.

Got it. All right, and then --

Normally, normally -- if you don't remember, it is typically the end users around, the 20% of the total semiconductor, about 10% or 12%, of our overall demand -- sales. But semiconductors, somewhere in the neighborhood of about 20%. Obviously, as the OEMs go down, they become a little bigger percent. But it is not going to be flip-flopped at all.

Got it. Got it. Okay. And also, in terms of your guidance for Q4, your OpEx guidance, does that bake in the shutdowns that you are going to have? And also, how many week shutdowns are you going to have in Q4?

It does include the shutdowns, yes.

And do you have 3 weeks or 2 weeks in Q4?

We probably -- we don't want to discuss that at this point, because we like to also make it formal, within the organization as well. So I think at this point, it is not disclosed.

Got it. But normally --

It won't be 3 weeks. It won't be 3 weeks.

It won't be. Got you. All right. Thank you.

You're welcome.

(Operator Instructions).

Jim Covello of Goldman Sachs. Please go ahead.

Hi, this is Mark Delaney calling for Jim. Thanks for much for taking the question. I was hoping you could maybe help us understand the impact of the supply chain optimization that Applied Materials is undergoing? And they've talked about wanting to consolidated their supplier base, and wondering what kind of impact you expect that to have on MKS, if any?

Okay. Well, I won't comment specifically on what Applied is doing, because that's is really their business. Certainly, we are their key customers. Let me just maybe paint the picture clearer for you, so no matter what anybody's doing in supplier optimization, because it has been happening about 10 years, 20 years.

The products that we provide, if you look at all the technologies that we provide. There are typically 1, 2, or 3 at most suppliers, that are legitimate suppliers in this market. We have the largest market share, in all of the products that we provide, in total, to that semiconductor market. So when people start talking about supply-chain optimization, I don't think they are talking about -- if there is a handful of suppliers. And again, if you look at some of the VLSI data, there are about 10 suppliers that represent 70% of the market in the things that we provide, the kinds of things that we provide. And we have about half of that market of 70%. There are another 8 or 9 suppliers that have the other 35%.

So it is not as if there are a 20 suppliers out there that they're using, and some customers are using, and they are going to consolidate to 2. In a lot of these technologies, I don't anticipate there would be a lot of consolidation. We certainly would look to gain share through technology, but I don't think you'll see suppliers like MKS in the consolidation path. It's pretty consolidated.

Okay. That's helpful. Thank you. And then you guys mentioned buying a new product from GE, I was wondering, what type of revenues are coming from that acquisition?

Yes, it is a relatively small product line. I think the key for us in this, is that we have talked about entering into bio pharm, in water purification, sanitizing water with ozone. And the relationship with GE, and buying that product line, first of all, gives us access to their customers from a service standpoint. It gives us access to the product itself. But I don't -- I think more interesting, is getting recognition from the service standpoint, and direct access to those customers. As you know, we haven't done a lot in that market. So brand recognition of MKS is a little bit different in bio -- pharmaceutical and food and beverage, than it would be in many of these other markets. So I think that helps.

And then, what GE is looking for from us, is to be a supplier of ozone products, not necessarily the product line that we bought from them. And so, we have an opportunity to -- GE does a lot of ozone systems, not the component piece of the subsystem that we provide -- we purchased that from them. So we now have an opportunity to be a key supplier to GE in their water purification division. So today, from a revenue standpoint, it is really related to their service piece. We do anticipate, over 4 or 5 years that, that business has the potential to do $20 million, $30 million, or $50 million, depending on how successful we are in penetrating it.

That's helpful. Thank you. And then last, Seth, I was hoping that you could maybe help us understand a little bit more, on how you plan to implement the share buyback? Are there triggers with the stock price, where you will step in and buy certain amounts? Or you guys will be opportunistic, as you feel is appropriate within the market?

Yes. Thanks Mark. I think it's the latter. We'll be opportunistic, we will look for the right conditions. As you well know, back in 2007 and 2008, we did repurchase [$215] million worth of stock, at about $21.76 per share. So we meet with the Board regularly. We are committed to be opportunistic, and that is our approach going forward.

I'm showing no further questions at this time. I would like to turn the call back over to Mr. Leo Berlinghieri for any closing remarks.

Okay. Thank you. So while we have seen some of stabilization of customer demand over the past several weeks, we remain cautious about the semiconductor market and the global economy's impact on our sales. However, as I mentioned in the call, in recent meetings, our customers continue to be cautiously optimistic, with positive expectations on the horizon a quarter or two a way. As a result of this, we will continue to closely control costs, but also maintain -- remain nimble to respond to any upturn. We are committed to growing our share in the important high-technology markets that we serve, and we are optimistic about our future. Thank you again, for joining us on the call today.

Ladies and gentlemen, this does conclude today's conference. You may now all disconnect, and have a wonderful day.