News

4 February 2009

 

Aviza’s accelerated cost cutting yields profit despite 29% sales drop

For its fiscal first-quarter 2009 (to 26 December 2008), etch and deposition equipment maker Aviza Technology Inc of Scotts Valley, CA, USA has reported net sales of $25.2m, down 29% on $35.5m last quarter.

To decrease its overall dependence on the falling DRAM market, Aviza has been downsizing its programs, products and spending related to trench capacitor technology for DRAMs, involving ceasing development of large batch thermal systems. Meanwhile, last April, Aviza announced a restructuring of its product strategy, served markets and internal operations to refocus on growth market segments with its single-wafer products, including its core strengths in atomic layer deposition (ALD) technology for the sub-45nm nodes, and PVD and etch technologies for the 3D-IC, MEMS and III-Vs markets. In particular, during the quarter Aviza's CVD system was installed and qualified at a major LED maker in Europe. Of total sales, as much as 44% came from Europe and 33% from Asia-Pacific, and just 23% from North America. This “validates our strategy of serving our markets with differentiated and cost-effective systems,” says president & CEO Jerry Cutini.

Aviza cut 18% of its staff and contractors last year and about 90-110 more in the December quarter. “We have made good progress in reducing our breakeven by accelerating cost reductions,” says Cutini. Operating expenses have been cut from $16.6m last quarter to $11.8m (including a one-time restructuring charge of $1.2m due mainly to an impairment of demonstration lab equipment). Operating loss has been more than halved from $3.6m last quarter to $1.5m.

Gross margin improved from last quarter’s 36.5% to 41%. Net income was $1.3m, compared to a loss of $3.1m last quarter and $8.52m a year ago. Aviza also gained $3.6m from the impact of the stronger dollar against foreign currencies (mainly the British pound). Adjusted net income was hence $4.9m, up on an expected $1-4m and an improvement from $0.9m last quarter and a net loss of $5.8m a year ago. Nevertheless, cash and cash equivalents have fallen further from $14.9m last quarter to $6.7m.

“The results of our December quarter reflect our ongoing efforts to improve our financial performance in the face of an extremely challenging macroeconomic environment with no visibility into the buying cycle of our customer base,” says Cutini.

However, fiscal second-quarter 2009 (ending 27 March) will continue to be challenging as Aviza again faces an unpredictable environment for orders, says Cutini. On the basis of continued weakness in customers' demand, the firm expects net sales of $13-18m (down by about 30-50%), with an adjusted net loss of $1-5m. “I do not expect the semiconductor market to stabilize for quite some time. However, I am optimistic that the markets we serve will continue to purchase our systems, albeit at a reduced rate from previous quarters,” he adds.

“As we continue to size the company appropriately, we anticipate further restructuring charges in the March quarter,” warns Cutini. Aviza will continue to institute shut-down days at varying times and locations. US staff are required to take off one Friday every two weeks (amounting to a pay cut of about 10%) and similar cuts are taking place internationally. Board members and senior management have accepted a 20% cut in fees and salaries.

Back in early January, Aviza said that it had engaged Needham & Company to assist in evaluating strategic options, including exploring partnering, financing and business development.

See related items:

Aviza to exceed profit guidance for December quarter

Aviza increases gross margin after restructuring

Aviza ships PVD systems to top-3 GaAs RF device maker

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