Filed by Credence Systems Corporation
Pursuant to Rule 425 under the Securities Act of 1933, as amended
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934, as amended
Subject Company: Integrated Measurement Systems, Inc.
Commission File No.: 000-26274
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 1
CREDENCE SYSTEMS
Moderator: Graham Siddall
May 16, 2001
4:00 p.m. MT
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the
Credence second quarter earnings release conference call. At
this time all participants are in a listen only mode. Later we
will conduct a question and answer session. At that time, if
you have a question, you will need to press the one, followed
by the four on your push button phone. As a reminder this
conference is being recorded Wednesday, May 16, 2001. I would
now like to turn the conference over to John Detwiler, Senior
Vice President and Chief Financial Officer of Credence. Please
go ahead sir.
John Detwiler: Thank you, I am here with Graham Siddall, our Chief Executive
Office and President, Dave Ranhoff, our Executive Vice
President and Chief Operating Officer, and a special guest, Mr.
Keith Barnes, the Chairman and Chief Executive Officer of
Integrated Measurement Systems, Inc. or IMS.
Welcome to the second fiscal quarter 2001 earnings release
conference call for Credence Systems. Graham will discuss with
you the highlights of the second fiscal quarter as well as the
state of the business. I will discuss business and operational
results as well as an analysis of the financials and share with
you the business outlook for Credence Systems in 2001. We will
not at this time discuss the business outlook for IMS, as
completion of
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 2
the transaction is still pending IMS shareholder approval as
well as regulatory approval. We would refer you to IMS' SEC
filings and public disclosures for information about the
company. At the conclusion of my comments we will open the call
for questions. We intend to limit today's conference call to
one hour and therefore, our opening comments will be relatively
brief.
Before we begin, however, I would like to make some cautionary
statements. By now you have probably reviewed our press
release, which was e-mailed to you this afternoon. If you have
not received the release please call Patricia Ling at
(510) 623-4703 and she can provide it for you. During the
course of this conference call we will make forward-looking
statements regarding future events or the future performance of
our company. Any such projections are based on limited
information available to the company, which is subject to
change. Although projections and the factors influencing them
will likely change, we will not necessarily update the
information since the company is only providing guidance at
certain points during the year. Actual events or results could
differ materially and no reader of this release should assume
later in the quarter that the information we provide today is
still valid. Such information speaks only as of today. Specific
factors could change, causing our projections not to be
achieved. We refer you to the documents the company files from
time to time with the Securities and Exchange Commission.
I now turn the call over to Graham.
Graham Siddall: Thank you John. Overcapacity in the test sector, particularly
at our foundry and subcontract customers in Asia, continued in
the second fiscal quarter of 2001. During the quarter we booked
only $28 million of new orders, resulting in a book to bill
ratio of approximately 0.65. In addition, during this quarter
we experienced some order cancellations and in response to the
weak conditions in the industry decided to work pro-actively
with customers to clear out backlog that could not be scheduled
with
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 3
reasonable certainty. This activity led to a reduction in the
previous backlog of $78 million. Net de-bookings therefore were
$50 million for the fiscal quarter. It is clear that in the
current economic environment our customers will not be adding
significant additional testing capacity until utilization rates
improve.
With revenue at $43.3 million our sequential decline from Q1
2001 was 65 percent. As we have continually communicated, we
are in a cyclical downturn in the test and assembly section of
the industry that probably began in October 2000 and could last
several more quarters before the excess test capacity is fully
absorbed and growth in our business resumes. We stated at the
beginning of the year our belief that a recovery may not occur
until late calendar 2001 or early in 2002. We still adhere to
that view. Some of our customers and others in the industry are
forecasting a return to growth as early as the third quarter of
this calendar year. We would of course welcome that opportunity
and are managing our business to be prepared for this
possibility but we are skeptical and have adopted a more
cautious approach. For the purposes of managing our business we
are assuming that bookings growth will not resume until fiscal
Q4 at the earliest.
With revenues continuing to fall, we reduced our head count by
a further 8 percent last Thursday. In the last three months, we
have reduced our headcount by about 300 employees. From a peak
of 1,450 in the first fiscal quarter, our headcount has now
fallen to approximately 1,140 today. In addition, we have
implemented a salary reduction for all domestic employees and
continue to operate on a reduced work schedule. Our goal is to
reduce our recurring quarterly operating expenses to
approximately $42 to $43 million per quarter in the next few
months. This figure includes the amortization of purchased
intangibles of $6.1 million per quarter. Reaching these goals
brings our break-even revenue level to approximately $65
million per quarter, excluding the amortization, or about $75
million per quarter with the amortization charges.
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 4
Visibility is still very murky but without improvements in
business conditions we now expect the next fiscal quarter's
revenue to be down sequentially from Q2 2001. We will review
the outlook with you in more detail in a few moments.
I would now like to discuss where I believe we are in the
semiconductor equipment cycle, and in particular, how this
environment has impacted Credence's business. As we discussed
on our last conference call, test equipment bookings began
declining in the November-December time frame. Test capacity
utilization declined from over 90% last October to the 80%
range in January and has fallen steadily and dramatically to
about 50% in April. The decline in test capacity utilization in
the Asia Pacific region where Credence has most of its business
is much greater than the declines experienced by IDM companies
in the rest of the world. As a pure play test company with
approximately 60% of our business with the foundry and
subcontract test companies in Asia it is clear that our
business will be impacted negatively until the back end
overcapacity is worked off and this could take several more
quarters. This booking weakness has now spread to the front end
wafer fab area, particularly for 200 millimeter equipment, but
the situation is clearly worse in the capacity -driven test and
assembly sector.
In the end, resumption of growth for the whole industry will be
based on greater spending in the end user markets. We believe
that this will not reassert itself until very late calendar
2001 or 2002. Clearly the length and depth of this cycle will
also be driven by the general health of the economy and this is
where the current federal initiatives on interest rate and
income tax cuts could prove beneficial.
Our business in Europe during Q2 represented 9 percent of gross
bookings and 17 percent of revenue. Our North America business
represented 40 percent of our revenue and 14 percent of our
gross booking during Q1. Asia was 37 percent of revenue
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 5
and 77 percent of gross bookings. 40 percent of the canceled
orders during the quarter were from Taiwan, 24% were in North
America and 33% were in Southeast Asia outside of Taiwan.
The top 10 Credence customers represented 51 percent of our
business in Q2 and 58 percent for all of fiscal 2001. Our mixed
signal business represented 69 percent of our year-to-date
revenue. Logic represented 5 percent and non-DRAM memory,
primarily flash, represented 15 percent. The remaining 11
percent of our business was made up of service and software.
Successful companies in the semiconductor equipment business
have demonstrated time and again that it is during the
downturns in the industry that the seeds are sown for success
in the upturn. The expense reductions we effected in the last
three months were necessary since the company was gearing up to
an $800 million revenue level which is clearly not going to
happen in the current market environment. However, despite the
reduction in head count of 300 people we are minimizing the
impact of the cuts in customer support and engineering and are
preparing the company to catch the next wave in business which
we believe could surface in earnest in calendar 2002. We are
focused on four major new product initiatives in the areas of
mixed signal test, flash memory test, wireless test solutions,
and design for test initiatives that have the potential to
break the increasing cost of test trend. We are also using the
downturn to restructure the company for greater efficiency by
fully integrating the numerous acquisitions that we have made
over the past year.
We are determined to position the company strategically for
growth in new markets and with new customers as we come out of
this painful downturn. It is in this last regard that today we
announced a definitive agreement to acquire Integrated
Measurement Systems, Inc. in a pooling of interests
transaction. We also signed a shareholder's agreement with
Cadence, IMS' largest shareholder. The agreement still awaits
shareholder and
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 6
regulatory approval. IMS specializes in providing high
performance integrated circuit validation systems, typically
for the design engineer in the design prototype stage for
validating and characterizing complex IC's. IMS is based in
Beaverton, Oregon with about 300 employees.
We believe IMS is an ideal strategic fit for Credence. Not only
are both companies' product lines fully complementary, but
together we will address the complex challenges of IC testing
from engineering through production. By pooling our resources
and strengths we can aggressively pursue opportunities in key
IDMs, increase our presence in North America, Asia and Europe,
and broaden our customer and relationship base. While IMS
supports the IC design engineer at the prototype stage for
validating and characterizing complex digital, mixed-signal,
and memory ICs, Credence focuses predominately on the high-
volume production-oriented customer. IMS provides stable,
technology-driven revenue in the down cycles of the industry
and hence will make the revenue stream of the combined company
less volatile. We believe that the combined company will be the
first test equipment manufacturer in the industry to provide
solutions from silicon characterization and validation to high
volume production test.
IMS will continue to operate in its current facility as a
wholly-owned subsidiary of Credence Systems Corporation. Our
Fluence subsidiary, which is only a few blocks away in
Beaverton, will be combined with IMS. Keith Barnes, IMS'
chairman and chief executive officer, will manage the new
subsidiary as executive vice president of Credence Systems and
president of Integrated Measurement Systems, Inc., a Credence
Company. Both Fluence and IMS have contracts with other tester
companies and we will continue to honor these contracts. I am
delighted to have Keith Barnes with us today and he will be
commenting on the acquisition later in this conference call.
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 7
Overall we are naturally very disappointed with the Q2 business
level and realize that we are probably in for at least another
two quarters before business improves. However, we believe that
we are well positioned as a company and look forward to the
eventual upturn and opportunities of the future. I will now
turn the call over to John, who will review the financial and
operational details as well as the fiscal 2001 outlook.
J. Detwiler: Thank you, Graham. The highlights of the second fiscal
quarter's financials are as follows:
Bookings for the quarter were $28 million, representing a 0.65
book to bill before the canceled orders. After the canceled
orders, the book to bill is negative. Our revenue for the
quarter stood at $43.3 million, down $79.9 million from the
previous quarter, or 65 percent. The gross profit margins for
Q2 stood at 48.2 percent, as compared to 57.3 percent last
quarter. We also took a charge in the quarter for the provision
of excess inventory of $45 million. We made this decision as we
gained greater visibility on the length and depth of this
industry downcycle. This provision was largely earmarked for
our logic and mixed signal product lines. Our inventory levels
decreased by about $29 million from the Q1 levels after this
provision. We continue to work to slow the inventory pipeline
in light of the changing industry environment. We currently
believe the inventory levels will peak in the third quarter,
but this is dependent on the future revenue results. Our total
operating expenses for Q2 were $48.8 million, down from $51.4
million in Q1. Excluding the special charges for our recent
headcount reductions, the operating expenses stood at $46.8
million, or down $4.6 million from the last quarter.
As we articulated in our last conference call, our short term
operating goal was to reduce recurring operating expense levels
to approximately $46 million per quarter, which includes the
purchased amortization. We almost reached that goal this
quarter. For next quarter, our goal will be to reduce these
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 8
operating expenses to $42 to $43 million per quarter. The
ongoing intangible amortization charges for the DCI and Rabkin
acquisitions added approximately $900,000 per quarter to the
run rate.
Our head count, ending Q2, was 1,140. As we mentioned, we
reduced our head count a further 100 people last Friday. We
plan to hold our head count relatively constant at this level
as we move toward our goal of lowering our recurring operating
expenses to the $42 million goal per quarter.
Research and development expenses for the second fiscal quarter
were $19 million, as compared to $20.5 million in the first
quarter. For the year, we expect to have R&D expenses at
approximately the $76 million level.
Selling, general and administrative expenses were $21.7 million
for the first quarter, as compared to $25.8 million in the
prior quarter.
The amortization of purchased intangibles is expected to remain
at $6.1 million per quarter.
Our total cash plus marketable securities stood at $343 million
and our days sales outstanding rose to 130 days as the
collection and payment term environment continued to
deteriorate in the quarter. Net interest and other income for
our first fiscal quarter stood at $4.7 million. Taking account
of the disbursement of $6 million for the purchase of Rabkin
during the quarter, our net cash change for the quarter was
almost neutral.
Total outstanding average diluted shares for the second fiscal
quarter stood at 54.04 million, down about 300,000 shares. For
purposes of the EPS, options were ignored this quarter because
they are anti-dilutive in periods when we have a loss.
If you exclude the special charges in the quarter, our pro-
forma
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 9
net loss stood at $13.6 million, or $0.26 per share. We used a
tax benefit rate of 35 percent for the year-to-date and for the
time being, we recommend that you use this rate for the
remainder of the year.
I now turn to the financial outlook for the rest of fiscal
2001. We believe Q3 revenue will be down in the $30 to $40
million range and that we will be at or near the bottom in Q3,
but we do not expect a significant rebound in Q4. We would
expect to have our recurring operating expenses down to the $42
to $43 million level, including the amortization charges. We
expect the loss for the third quarter to be in the $0.25 to
$0.35 range, including the amortization charges.
We believe our book to bill will remain below 1.0 in Q3. At
this point it is difficult to provide fair guidance on
bookings. This guidance is dependent on the current weak
business environment not getting any worse. As we have reviewed
with you, the business outlook for the next six months is very
uncertain. Despite the current market conditions, we are
excited about Credence's prospects and our future earning
opportunities. We completed a year of gaining significant
market share and diversifying our business and believe that
this provides the foundation for future growth.
We will now turn to Keith Barnes for a few words before we open
up the call for questions.
Keith Barnes
Good afternoon. For several years, we at IMS have known
Credence Systems. Both companies have roots that go back to
Tektronix and we have supported certain Credence ATE products
with our VT SW products. We have produced tester fixtures,
which make certain of our systems compatible with some of
theirs. This has assisted mutual customers to rapidly move from
the design environment using IMS systems to the production test
phase where they use Credence systems. We have had discussions
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 10
in the past about combining their Fluence division with our VT
SW division, as well.
We make complementary systems and software products. While IMS
supports the design engineer in the design prototype stage for
validating and characterizing of complex digital, mixed-signal,
and memory ICs, Credence predominantly supports the backend
production oriented customer.
The flow from design validation to production test is a natural
flow and this combination is one, we believe, which will
provide great value to our customers and to our shareholders,
alike.
The unique marriage of IMS prototype validation test technology
with EDA technology has always been a key differentiator. We
have been strongly influenced by the needs of the IC designer.
Many of the world's leading semiconductor manufacturers and
systems manufacturers are our customers. These customers need
to move rapidly from design validation to production test with
confidence. The combination of IMS and Credence will assist
them with this flow.
We tie directly into the Cadence, Synopsys, and Mentor Graphics
design simulation environment to extract the design intent and
assist our customers during the prototype validation phase to
determine design, fabrication, and performance anomalies.
Our systems products are used to validate complex prototype IC
s which include Digital Processors including, but not limited
to, DSPs, fixed and floating point, leading microprocessors and
microcontrollers, embedded processors, etc... We also validate
leading edge Mixed Signal devices used in Graphics, Network
Processing, Wireless Communications, etc... And we validate
designs in the high speed memory area including DRAM, SRAM, DDR
RAM, and RAMBUS memories. Further, as these elements are
combined into complex SOC devices, we have systems which also
validate these integrated SOC devices.
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 11
As I mentioned before, we also have a Virtual Test Software
division that provides tools for designers and test engineers
to move data from the design phase to the production phase.
These tools enable test IP development and simulation using
standard Verilog and VHDL simulation tools. Credence is one of
the ATE vendors we support with our VT products.
IMS and Credence have complementary offerings in each of these
categories. When combined we will be able to provide our
customers with a smooth flow from design to production test,
providing greater value to our customers from a single
supplier.
IMS's main customers include the leading IDM's as well as
fabless semiconductor companies, and systems manufacturers
located throughout the world. Credence's customers are mainly
test houses and contract manufacturers, and primarily located
in Asia. Together, we can expand our focus to a broader
customer base and more diversified geographical mix. More
customers in more companies with a broader mix of technologies
should add up to more value for the customer and for Credence
investors.
Other synergies exist on the technology development and
integration side. IMS deals in the newest high-speed, high-
complexity designs. The Credence production test products will
need to meet similar speed and pin count requirements within a
year or so after IMS build its products for the designers.
Sharing the technology development will lower the overall R&D
for both companies and allow us to get to market faster. We
should be able to achieve lower product costs because of higher
volumes of commonly used components and subsystems. And, by
having more of a prototyping phase on the IMS products before
ramping the production on Credence products, we should be able
to achieve better overall quality.
Like Credence, IMS is proud of its quality record. For seven
years in a row, IMS has been ranked by its customers as number
CREDENCE SYSTEMS
Moderator: Graham Siddall
Page 12
one in the world for quality and customer service.
In summary, we believe this deal makes good business and
financial sense. It provides a great product flow for our
mutual customers, it allows us to leverage more technology to a
broader customer base worldwide, and this should translate to
better shareholder value for IMS and Credence shareholders as
we execute.
John Detwiler: We will now turn the conference call over to the operator for
your questions. Thank you.
Operator: Ladies and gentlemen, we will now begin the question and answer
session. If you have a question, you will need to press the
one, followed by the four, on you push button phone. You will
hear a three tone prompt acknowledging your request, and your
questions will be polled in the order they are received. If
your question has been answered, and you would like to withdraw
your polling request, you may do so by pressing the one,
followed three, on your push button phone. If you are using a
speaker phone, please pick up your hand set before pressing the
numbers.
One moment please, for the first question.
Keith Endres, Transcription Coordinator at 303-633-3879
Additional Information and Where to Find It
Investors and security holders are advised to read the proxy
statement/prospectus regarding the transaction described in these materials,
when it becomes available, because it will contain important information. The
proxy statement/prospectus will be filed with the SEC by Credence and IMS.
Security holders may obtain a free copy of the proxy statement/prospectus, when
it becomes available, and other related documents filed by Credence and IMS at
the SEC's website at www.sec.gov or at the SEC's public reference room located
at 450 Fifth Street, NW, Washington D.C. 20549 or at one of the SEC's other
public reference rooms in New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
When available, the proxy statement/prospectus and the other documents may also
be obtained by contacting by either company.
CREDENCE
Moderator: Graham Siddall
May 16, 2001
4:00 p.m. MT
[question and answer session only transcribed per client request]
Statements in this recording other than statements of historical fact are
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward looking statements include
statements regarding the transaction potentially being accretive to earnings,
the transaction qualifying for pooling of interest accounting and providing
additional opportunities regarding customers, products and markets. Any
projections in this recording including expectations that the acquisition of IMS
will be immediately accretive are based on the limited information that was
available on May 16, 2001, which is subject to change. The companies' actual
future results could differ materially from the results discussed herein.
Factors that could cause or contribute to such differences include the risks
inherent in acquisitions of technology businesses including the successful
consummation of the merger and integration of the companies, the timing and
successful development of technology; the ability to retain key management and
hire technical personnel and other employees; changing relationships with
customers, suppliers and strategic partners; unanticipated costs associated with
development and marketing activities; customer acceptance of new product
offerings; pricing of new products, and competition in our various product
lines. Such forward looking statements speak only as of May 16,2001 and the
companies do not undertake any obligation to update any forward looking
statement to reflect events or circumstances at any time in the future. For a
more complete discussion of the risks and uncertainties for each company is set
forth in each companies' annual report on Form 10-K or quarterly report on Form
10-Q as filed with the Securities and Exchange Commission.
Investors and security holders are advised to read the proxy
statement/prospectus regarding the transaction described in these materials,
when it becomes available, because it will contain important information. The
proxy statement/prospectus will be filed with the SEC by Credence and IMS.
Security holders may obtain a free copy of the proxy statement/prospectus, when
it becomes available, and other related documents filed by Credence and IMS at
the SEC's website at www.sec.gov or at the SEC's public reference room located
at 450 Fifth Street, NW, Washington D.C. 20549 or at one of the SEC's other
public reference rooms in New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
When available, the proxy statement/prospectus and the other documents may also
be obtained by contacting either company.
IMS and its executive officers and directors may be deemed to be
participants in the solicitation of proxies from IMS stockholders in favor of
the adoption and approval of the Merger Agreement and approval of the merger and
related matters. Information regarding such officers and directors is included
in IMS's proxy statement filed with the SEC on April 18, 2001. This document is
available free of charge at the SEC Web site at http://www.sec.gov and from IMS.
Operator: The first question comes from Gunnar Miller from Goldman,
Sachs. Please go ahead with your question.
Gunnar Miller: Graham, you had discussed the, I think, the aggregate
utilization rate and had discussed the test house utilization
rate. Could you talk about IDM utilization rates, since the
orders began to downtick later, and how we might see the timing
of that happening, relative to the test house?
Graham Siddall: Gunnar, I think we have better visibility on the test house
utilization rates than the IDM, but our guess is that the IDM--
our IDM customers are running around a 75 percent utilization
rate currently, which is obviously down considerably since the
last quarter of last year. And obviously, when they're down to
75 percent, the excess capacity that they usually outsource
goes down significantly. For example, a customer like ST, which
subcontractors quite a lot to UMC, I believe that they've cut
back something like 60 percent in terms of the outsourcing to
the subcontract foundries.
In terms of what's going to happen with IDMs relative to the
foundry and outsourcing community, my belief is that the IDMs
will bottom out in the 60 to 70 percent range, is my feeling.
And I think they don't want to cut back too much in terms of
the outsourcing to the foundries, because of course, when
things turn up, they don't want to be out on allocation the
next upturn. So, my belief is that the IDMs will bottom out
sometime in the next two quarters. We have evidence that things
are going to bottom either this quarter or next quarter with
most of our customers in Taiwan, and they're indicating that
utilization rates should be beginning to turn up in calendar
Q4; certainly some of them have said as early calendar Q3. And
then, of course, as they start to move up towards 70, 75
percent, I think we'll start seeing a resurgence in buying for
test equipment. But typically, they like to be at 85 percent,
which is where most of them were last year, and they're still a
long way from there.
G. Miller: I guess just to put a finer point on it, what I'm trying to get
at here is because there's so much over-capacity at the test
houses, do you think that that could delay the recovery wave in
the IDMs, because the IDMs know that there's enough slack
capacity out there to fill up, even as things begin to recover?
CREDENCE
Res. #18562036
Moderator: Graham Siddall
May 16, 2001\4:00 p.m. MT
Page 14
G. Siddall: I mean, I think so. I mean, clearly, although the front end is
holding up relatively better, we've seen that new technology
buys are continuing, but of course, a lot of additional
capacity is going into the IDMs right now, in terms of front
end equipment, and I believe a lot of that capacity will
eventually be taken up by the outsourcing community. I think
the long-term trend is still going to be in favor of going
towards outsourcing because the IDMs have cut back also
significantly in their test equipment, although obviously not
as much as the contract community. And when the upturn returns,
I believe that more and more outsourcing will go in test to the
subcontract test people. And this will also be amplified, I
think, by the move to 300 millimeter.
G. Miller: Thank you.
Operator: The next question comes from Dave Dooley from Dave Duley from
Wells Fargo Van Kasper. Please go ahead with your questions.
Dave Duley: Yes, well, I have an assortment of questions. I'll just hit you
with a couple initially. Could you talk a little bit about--and
when you put Credence and IMS together, I know you probably
don't want to review the product roadmap for us, but there
seems like there's a lot of things that you might do with IMS
technology in your high-running production environment. Could
you clue us in on kind of what the 30,000-foot view is there
for the combination as far as the product roadmap goes?
G. Siddall: Dave, it's a little early to talk about that. We just signed
the agreement today, but we're clearly very excited about the
potential here. As Keith explained, IMS is focused
predominantly on the IDM community and in terms of the new
generation IC devices, could fit perfectly with the gaps in our
product lines basically, which is that we focus very much on
low-cost production, primarily with the subcontract community.
And the fact is also that they're very close to our
headquarters, to our manufacturing and our Fluence facility up
in Oregon means that we're going to be able to realize the
synergies, I think, much more easily than if we were in a
different state.
We already have had a relationship with IMS going back for some
years, in terms of our products, and a lot of our people know
each other very well. And we've been very impressed so far with
the synergy we've seen between the management and engineering
teams with the company, as we've pursued our due diligence in
the last few weeks. So we're very excited about this
opportunity and the next few weeks, we'll obviously be working
on product roadmap plans prior to completion of the merger in,
probably, in our calendar Q3.
So, at this stage, it's a little early, but we've-- in our
discussions during due diligence, there's been no shortage of
opportunities that we feel we can work on together.
D. Duley: Well, I guess more specifically, I know IMS has got this
virtual test software and you know, that really, I believe,
helps in designing circuits early on and lowers the cost. And I
was just wondering, if there an obvious-- you know, is this
merger going to help your strategy in pushing the overall test
of-- the overall cost of tests lower at the production side of
things?
G. Siddall: We believe we should be able to offer the lowest overall cost
of test solution to our customers now, going right from the
design site. As you know, we have a lot of intellectual
property in built-in self-tests at Fluence. And we have the TBS
[sp] Software Group there. This, combined with the virtual test
and the other products that IMS has, will really help us to
CREDENCE
Res. #18562036
Moderator: Graham Siddall
May 16, 2001\4:00 p.m. MT
Page 15
reduce the time-to-market for our customers. I think time-to-
market, if you can reduce the time-to-market with a overall
better test solution, then it's going to have a big impact on
the overall cost of tests.
D. Duley: OK, Hey, and, I just listened to one of your competitor's
conference calls in the last couple days, and you know, they
were talking about having a low-cost- lower cost, SOC-type
platform out there. I was just wondering, without getting too
specific about new products, kind of what you're doing on the
new product front in your high-running products, both your
Quartet and your Kalos? I realize you don't want to tell us
exactly what's going on the roadmap, but from a 30,000-foot
perspective, you can give us a little detail as to help us
understand the competitive environment out there.
Dave Ranhoff: Hi, Dave, this is Dave Ranhoff. Maybe I can take a cut. We
are, as John indicated, we're planning to spend 76 million in
R&D this year, and that money is divided up primarily in those
two key areas you identified, most of it going into our mixed
signal roadmap and secondarily, the second major bunch going
into the--into our memory roadmap. So we are very, very clear
in our customers' requirements and that is to continuously
lower the cost of test, and secondarily, is to get these
complex new designs to market in a timely manner. I think
we're addressing the second issue with the IMS piece, and if
you look at the 76 million we're spending this year on R&D,
it's clearly aimed at exactly you're describing -- lowering
the cost of test for complex SOCs and flash memory devices.
Secondarily, we've invested heavily in Quartet roadmap and
we're looking at sharing common technology across the company
to add more pins, more performance, and lower the cost of that
platform, moving forward. So you'll see new products being
introduced over the next several months to a year that
specifically do what you're describing. So I think we're very,
very focused, and secondarily, we're very well-positioned when
this market turns back on to capture some incremental share
and grow those two major market segments.
D. Duley: OK, and final-- just a clarification, John, could you review--
Graham spoke, in his prepared comments, about the break out of
revenue and orders this quarter geographically. I couldn't
write them as fast as they were spoken. Could you just review
those real quick?
John Detwiler: OK, on the revenue, Asia was 37 percent, the U.S./North
America was 40 percent, Europe was 17 percent. On the
bookings--sorry. Let me read this-- I'll just read it verbatim
here. On bookings, Europe was 9 percent of bookings and 17
percent of revenue, North America was 40 percent of revenue
and 14 percent of bookings, and then Asia was 37 percent of
revenue and 77 percent of gross bookings.
D. Duley: OK, thank you.
Operator: The next question comes from Sue Billat with Robertson
Stephens.
Saresh Balaramen: Yes, this is Saresh Balaramen [sp] for Sue Billat. You
talked about a break-even revenue levels; what kind of gross
margins can we be modeling for those kind of numbers?
Man: We believe at this stage that we're right below the 50 percent
gross margin level. We're probably 48 to 50 percent, just
depending on where we come out on revenue and what portion of
the revenue is coming from service.
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S. Balaramen: OK. Also on the IMS acquisition, you talked about product
strategy, in terms of adding new customers, IMS had some big
IDMs as their key customers and they also have a lot of
penetration in Japan, and are there some synergies for
Credence to enter those markets?
Keith Barnes: I'll take that one, Saresh. This is Keith Barnes.
S. Balaramen: Hi, Keith.
K. Barnes: Hi. Certainly, that will be one of the things that we'll be
looking at most closely over the next several months, is how
we can leverage the existing contacts that we have in the IDMs
and also in the systems manufacturers who can influence the
contract manufacturers and test houses overseas. So, we'll be
looking at that, and I think there can be established, after
the deal, a fairly smooth flow between our products and theirs
and provide a better leverage and overall cost to the
customer.
S. Balaramen: Can you also give us some more color on what kind of products
it could be because some of these big IDM customers, they
don't seem to be using a lot of mixed signal testing, so is it
more like logic testing of--
K. Barnes: Well, you know, they have, for a long time, been using our
systems, predominantly in the logic area. That's been
shifting. In fact, last year, I think the numbers were that
our mixed signals grew 171 percent last year. And so we're
seeing much more of a shift towards mixed signal, which is a
common theme that I think the folks at Credence are seeing as
well. And then in the RAM area, we have the large-- the four
largest companies in the world using our products in the DRAM
area, so that would be Samsung and Hyundai and Micron and
Infinia. And so we're strong in that area. They're pretty
strong in the flash area, so there would be opportunities for
us to work together to start to leverage both sides of that
area, as well as mixed signal and logic as well.
S. Balaramen: OK, thank you very much.
K. Barnes: You bet.
Operator: The next question comes from Glenn Yeung from Salomon Smith
Barney. Please go ahead with your questions.
Glenn Yeung: Graham, you talked about de-bookings in the quarter, and I
know from a bookings standpoint, it was a tough one, but was
there any pattern to the de-bookings, i.e., did they happen
early in the quarter and slow down or fairly linear
throughout?
G. Siddall: Dave?
D. Ranhoff: Glenn, this is Dave. Maybe I can respond.
G. Yeung: Hi, Dave.
D. Ranhoff: As Graham said, we were really proactive with our customers.
We wanted to take the opportunity to ensure our backlog was
solid. And as you know, when we grew really rapidly last year
and then saw such a fall-off, we recognized, as well as our
customers did, that a lot of the bookings that we had weren't
being scheduled. So, you know, out of the--out of 100
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Page 17
percent
of the de-bookings, a lot of them were conversations we had
with our customers to get them de-booked, as much as the
customer forcing a de-booking on us. We want to exit with a
solid backlog strategy and we felt that we were just over-
exposed in the backlog area. So you know, in the first two
months, there was a very small percentage that the customer
actually cancel. And then between the second and the third
month, we actually worked proactively to make sure that as we
exited this quarter we had a really firm backlog.
G. Yeung: And as you look at the IMS acquisition, and I think this has
been asked a bunch of different ways already, but I just want
to get a sense of-- I mean, it looks like IMS, in the
validation space, has done some work in non-traditional
Credence end markets, i.e., you know, more advanced logic.
Would it make sense, Graham, for you guys to start poking
around in that area on the test side more aggressively?
G. Siddall: Well, again, Glenn, it's a little too early to say. I mean,
we've just signed the agreement. We've only had a limited
interaction at the senior level of the company in terms of
doing the due diligence. We wanted to move quickly because we
felt that the right time to do-- putting the two companies
together is during a downturn so that we can make plans and
prepare ourselves for the upturn. And it's a subject that we
will be looking at very intensively over the next few months.
So, it's just a little too early to say, except for the fact
that we probably have more opportunities that have surfaced
during the due diligence than we can address with the
resources we have.
G. Yeung: OK. As opposed to just-- I think you talked about on the R&D
front, continuing to focus the mixed signal- well, actually,
four fronts, right: Mixed signal, wireless test, design for
test, and flash--
G. Siddall: And DFT.
G. Yeung: And DFT, yes. I wonder if you can give us any indications as
to where your customers are pulling you in those areas, just
to give us a sense of how the future could shape up in terms
of the technology?
D. Ranhoff: Well, Glenn, in mixed signal, they're pulling us for lower
overall cost, faster time-to-market, more pins, more data
rate, more analog instruments. Those are the primarily
elements of mixed signal. And in flash memory, they want to
move to more sites. And we're certainly doing that because
we've introduced our 32-site machine. And I think the other
key area that they really pulled in is the whole engineering
to test link, which we're providing with the personal Kalos to
the Kalos. So, I think we're very, very well-positioned there.
But that's really-- you know, traditionally in this business,
it's been pins and speed.
G. Yeung: Right.
D. Ranhoff: And now, as you look at mixed signal, there are quite a few
more cells that are being integrated into these SOC designs.
So they're now really pushing hard for more capable analog
instruments, higher throughput, and faster time-to-market. So,
you know, those are the key elements that we're staying
focused on.
G. Yeung: Great. Thank you.
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Page 18
G. Siddall: The other comment that I'd like to make is we have seen
significant interest from some major IDM companies in the DS
test approach as a solution to reducing the cost of tests. And
these are companies that we have, in the past, not done
business with, these major IDMs. They seem to be very
interested in the approach that we're taking. And again,
that's an area where I believe that IMS will be able to help
us significantly.
G. Yeung: Thanks, Graham.
Operator: The next question comes from Tim Arcuri with Deutsche Bank
Alex Brown. Please go ahead with your questions.
Tim Arcuri: Hi, guys. Actually, I was wondering if you can give a little
bit of breakdown in terms of orders by product -- if you could
break that $28 million of gross orders down by mixed signal,
logic, flash?
J. Detwiler: Yeah, I'll take that, Tim. On product bookings, we had 48
percent on mixed signal, 19 percent on memory, 10 percent on
logic, and then 23 percent on the software and service side.
And then on the revenue, and this is for the first half, I've
got 69 percent in mixed signal, 15 percent in memory, 5
percent in logic, and 11 percent in software and services.
T. Arcuri: John, did you just say-- when you were giving out orders, you
said that software and services was 20 percent? I'm sorry.
J. Detwiler: Twenty-three on the bookings.
T. Arcuri: Twenty-three on the bookings, OK. And the revenues-- so the
bookings were for this quarter, but the revenues are for the
first half?
J. Detwiler: That's right.
T. Arcuri: OK, OK. And Graham, you know, given your-- given your
experience now in both the front end and the back end, I was
wondering maybe if you could kind of comment -- you were
talking about utilization rates at the test houses not
increasing until calendar Q4. However, we've heard TSMC say
that they're going to see their utilizations increase probably
in Q3. So really, we're seeing the front really lead the back
end this time, if it, indeed, plays out this way. Can you kind
of talk about that? Is that something we've ever seen before?
G. Siddall: That's a good question, and even though I've worked in the
front end for a long time, I don't think anyone really
understands the model in terms of whether the front end
precedes the back end or vice versa. It certainly seems that,
in this downturn, the back end preceded the front end by about
a quarter. You know, we saw October-November timeframe, our
bookings begin to start dropping. And we didn't see the same
level of bookings downturn in the front end until about a
quarter later. Some people that I've talked to in the industry
really believe that the back end will lead the downturn in
terms of the recovery, and when it-- and I hope--clearly, we
hope that's the case. We're being somewhat skeptical on the
utilization rates because our customers have been telling us
for some time that the utilization rates were bottoming out,
and we haven't seen it, so we really hope that TSMC is correct
when they say that it will bottom in Q3. Of course, it will be
a while after they bottom before-- they need to see a really
positive trend upwards before they'll start buying testers in
quantity. But I think UMC made a statement in the last week or
so that they don't see a strong recovery until 2002,
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Page 19
so a little less optimistic, I think, than the TSMC comments.
And we just have a wait-and-see attitude. The one thing about
this industry that I have learned in terms of these cycles is
that things tend to change much faster than you anticipate.
For example, I've never seen a drop-off in bookings as fast as
I've seen in this downturn. I think the last time it was as
strong as that was in 1985, which, in fact, as you know, was
one of the first times that the unit IC production has dropped
from the previous year, and we're seeing a similar situation
this year.
However, it tends to turn back remarkably quickly, too, and
when I first came to Credence two years ago, Dennis Wolf, the
CFO, was very pleased because we just managed to sublease one
of our buildings because we needed the rent. And eight weeks
later, we needed the space more than the rent. We went from
basically in two months, the situation changed dramatically,
so hopefully we'll see that situation again. But I think the
question right now that everyone is asking, is not so much
when is the bottom. I think most people believe that we're
kind of bouncing along the bottom right now, and that sooner
or later, we're going to bounce off the bottom. It's a case of
how big is the bounce going to be, how quickly will we lift
off? And with the utilization rates as they are with our
customers, it's going to take a lot of new business before we
start really taking off to the extent that we did in the last
upturn. And of course, it all boils down to new drivers, and
for us communications is a pretty important factor. The
afterburner for our growth last year was the communications
sector on top of the PC. And I think a lot of people believe
that the communications sector will not be turn up strongly
until next year. And those drivers are going to be important
in terms of getting those utilization rates back up again.
T. Arcuri: OK, great. Thanks, Graham. And then I guess as a final
question, it's been proposed that one of the reasons why the
industry is so cyclical is because the enforcement of cancel
fees has not been--has not been done by the companies selling
the equipment. Do you foresee that maybe changing, going
forward? Do you think you'll ever be able to maybe enforce
that to prevent customers from double ordering and triple
ordering at the peak of the cycle?
G. Siddall: Tim, that's a very good question. I mean, the problem with
this industry is that you have a limited number of customers
that can afford to build fabs or build test houses. And it's
not like the automobile industry where, you know, if you lose
one customer, there's probably lots of others willing to buy
an automobile. In our case, we have a finite number of
customers, and especially when you've done really great
business in the upturns. Remember, people forget that the
amount of money you make in the upturns is a lot greater than
the amount of money you lose in the downturns with most
companies. And as a result, the last thing you want to do is
to alienate a good customer by enforcing penalties on
cancellations at a time when that customer is also going
through tough times. So, I think the feeling is that you share
the pain in the downturns, you focus on really supporting that
customer to the fullest extent possible during the downturn.
And that's certainly been one of our strategies. We've really
done minimal cutbacks in the support area. Because if you look
after your customer in a downturn, then inevitably they repay
that in the upturn by buying your equipment, so it's a
delicate balance. But on the whole, I think it's going to be
very hard to-- if you rigidly enforce the cancellation
charges, the customer may well be reminding you of that when
business turns up. That's been my experience.
T. Arcuri: I see, I see. Great, Graham. Thanks a lot.
Operator: The next question comes from Nick Tishchenko from ABN Amro.
Please go ahead with your questions.
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Page 20
Nick Tishchenko: Good afternoon. My question, Graham, is related to the
previous one. I'm also concerned about the rate of the
recovery in the utilization rates at your customers. And this
is true that TSMC is talking about utilization rate bottoming
as we speak in the third quarter. But, there is one more piece
in this mosaic that was missing in your discussions, and this
is namely dye banks [sp]. Yes, we can talk about the
utilization rate of equipment at TSMC going up after third
calendar quarter but the driver for your bookings and sales is
unit volume. And we still have a lot of inventory and dye
banks. So what you think -- what's happening with this
inventory right now? And do you believe that if the end market
demand will pick up, you'll see the double flow first from the
increased utilization rate of front end equipment at the fabs;
and second, pull from dye banks at your customers?
D. Ranhoff: Nick, this is Dave. Let me try to take that. I was in Asia
about two weeks ago, and we spent quite a bit of time talking
about this issue around dye banks. And you know, there are a
number of places that these banks exist. First of all, it's at
the fab; secondly, at the assembly and test house. But, you
know, bottom line is most people aren't investing a lot of
energy to test these devices because the certainty of their
future is somewhat in question. It's got a lot to do with how
big the dye bank is, and secondarily new products being
released by their customer and what's going to happen to
these. For example, if you look at programmable logic devices,
they don't program them until they are close to having an
order, so those will sit and you can't touch them until
they're programmed. And likewise, other devices, they're
really not putting a lot of extra dollars into testing these
devices until which time they have a firm order. So, you know,
while there are dye banks there, I think a lot of these parts
are not tested, and therefore, I think when the industry turns
you'll see a pretty direct correlation between utilization
rate and dye bank. So, we don't expect there to be much of a
lag.
N. Tishchenko: My point was that you should not lag the foundries, the fabs,
by--as we are talking about, two quarters, because you will
see the orders for the equipment used to test these dye banks
and the test chips being produced by the fabs. What I'm trying
to ask you, do you see this second driver for your business,
for the utilization of your equipment at your customers? It's
not just what the foundries will manufacture, what your IDM
customers will manufacture, it's also the dye banks. So we're
talking about two or--pipelines for the product that should be
tested.
D. Ranhoff: I understand, and I think you're absolutely right, because
what you'll have, the new fab capacity coming online in
addition to the dye bank coming on line. And you know, I don't
know that we've really modeled that to have a real
understanding of what that means to overall utilization. But I
can understand your comment, in that we would expect to see
more testing required to serve that.
N. Tishchenko: Thank you very much.
Operator: The next question comes from Steve Pelayo from Morgan Stanley.
Please go ahead with your questions.
Steve Pelayo: Yeah, I missed a portion of the call. Could you help us out
with where your backlog now stands, with the 43 million in
cancellations in the previous quarter and 78 million, I guess,
this quarter? Where does it stand, and could you talk a little
bit about the quality of it? How much is shippable in the next
three to six months, what kind of turns you need to do, and
that type of thing?
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J. Detwiler: The current backlog right now, Steve, is 128 million. And as I
recall, about 75 percent of that is firmly booked and the
other 25 percent, we feel, is in a reasonable period to leave
it in backlog, so that's where the backlog stands.
S. Pelayo: And how much of that 128 million is dog-eared ship in the next
quarter or the next two quarters?
J. Detwiler: Not very much in the next quarter.
D. Ranhoff: Steve, this is Dave. We're-- you know, we're constantly asking
that question ourselves. And you know, right now, we've got,
as John said, about 75 percent of that total backlog we've got
with customers that's identified in slots. However, we're
still working with the customer to try to really lock down the
exact date. So we don't-- and every week we ask, the number
moves around a little bit. But right now, we took the backlog
down to that number of 128 million because we felt confident
that those orders were either scheduled or with excellent
customers who may not have an exact date that they want to
ship it, but they have a month or within a month or two they
want to schedule it. And the requirement was that has to be
scheduled within a year period, so that's where we are. And as
John said, if we look at the next quarter, you know, every
week we ask, the number is moving around a little bit, so I
really can't quote an exact number and give you a feel for how
much is scheduled in the next quarter.
S. Pelayo: OK, fair enough. And did you make some comments on the Chaos
[sp] and the flash market right now? Are you still seeing some
pretty good growth with some of the new customers coming on?
Is that your one area of strength or could you just give us a
little bit more detail on flash?
D. Ranhoff: Yeah, I think, Steve, it is an area of strength for us. We've
installed a large number of personal Kaloses in the last
quarter, and while the revenue for that isn't very
substantial, the locations that we put them in are very
promising. As Graham indicated, we've got two new major IDMs
that came on in the quarter, one in the U.S., one in Japan. We
can't yet talk about them in a lot of detail, but in each case
we put multiple personal Kaloses in, we're working with their
engineering teams in qualifications. And we've got quite a few
new design wins. I think Graham also indicated in the first
half of the year 18 new customers, of which four are major
IDMs. So while, you know, the bookings are very, very
disappointing, the revenue numbers are low, we are installing
a number of these machines into some really critical areas for
us, and [inaudible] we're going to be able to take advantage
of it.
S. Pelayo: OK, my last question is really relative to IMS. I believe
they, you know, have partnerships with Schlumberger and
Teradyne and Agilent and I think a top customer like Intel.
I'm curious if, by partnering up or by actually being acquired
by you, if that could possibly jeopardize some of those
relationships with the other--with your competitors, the other
test equipment suppliers.
G. Siddall: It's Steve. With our Fluor [inaudible] we also have similar
partnerships. And we basically have had-- given them a fair
amount of autonomy in terms of operating with other test
companies, and in fact, with also some other semiconductor
companies who, in fact, buy our competitors' testers rather
than our own. And we believe-- I mean, for example, IMS
recently signed a contract with Agilent, despite the fact that
actually IMS and Agilent also compete in other areas. I think
in this day and age, this is happening more and more. And we
believe that the virtual test software is software that can be
used right throughout the industry and could
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Page 22
become a de facto standard. And as such, we feel it's a
benefit to our customer base for us to offer that as a
product. And clearly, by owning IMS, we hope to get some long-
term benefits in terms of growing our business but we
certainly intend to honor the contractual relationships with
the existing customer base of IMS. Keith, you may want to
comment on that too.
K. Barnes: Yeah, I would just echo, Steve, what Graham has said. We have
actually competed with different APE vendors for some of the
engineering business over time, and we've still been able to
craft a method of co-opetition [sp] with them for many years.
And we certainly will continue to do that as we go forward.
S. Pelayo: OK. And actually, one quick follow-up, Graham. I think Dave
Duley was trying to get your thoughts here on a product
roadmap. I'm wondering -- you know, historically, you guys put
up slides in your presentations that say, "We focus on the low
to mid-range, high-volume, low-cost solutions." By partnering
with IMS, or pardon me, acquiring IMS, they address some of
the very leading and bleeding edge logic test out there. Are
we-- is this a new direction for Credence, to start to address
a little bit more of the leading edge? And do you think you're
going to follow that up by actually migrating your existing
tools to that area as well?
G. Siddall: I mean, clearly, Steve, we've stated for some time that part
of our strategy is to win more IDM business because clearly in
a downturn like we're experiencing now, we're much more
exposed than the other testing companies. And clearly it's no
fun, and we'd like to change that. And I think this is what
people are expecting more and more, even from lower cost
testers. And if we can provide the punch of the $5 million
tester and $2 million tester by providing a better overall
solution from the design right through to production tests,
then that's going to be a clear advantage to IDM customers as
much as it is to us, those contract customers. And so I think
you'll find that we'll be, obviously, moving the performance
for our testers upwards, just as with the DST tester approach
and with the combination of the technology that we have at the
two companies, we should be able to, again, provide a better
solution at lower cost than we could do by continuing on our
own as an independent company.
S. Pelayo: OK, fair enough. Thanks, guys. Take care.
Operator: The next question comes from John Pitzer with Credit Suisse
First Boston. Please go ahead with your questions.
John Pitzer: Good afternoon, guys. I just kind of want to revisit the
scrubbing of the backlog issue just so I think I have a better
understanding of what was the threshold that you guys used to
go back and take bookings out of backlog. Was it quality of
customer, shippable within a certain period of time, if you
could just give a little bit more detail on that, please?
D. Ranhoff: Yeah, John, this is Dave. There were two things we did. One
is, as I said earlier, there were a few customers that did
want to cancel orders. So we acknowledged that, but that was a
relatively low percentage of the total, probably in the range
of somewhere less than 20 percent. With the other customers,
what we had done during the period is really gone in and
looked at our backlog because as you know, our backlog was
very, very high, but our revenue was quite low. And therefore,
we had a pretty diligent process during the up cycle to try to
only book orders which we thought were very valid and we
wanted to maintain that--that policy with our backlog. So we
actually looked at orders where customers had placed larger
volumes and then just stopped accepting delivery, went back to
those customers and asked
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Page 23
their intent. And if we weren't able to schedule it within a
one-year period with a fairly firm date, we asked that we de-
book it. So it was a proactive dialogue between us and our
customers, so that we had backlog that we could talk about and
we could manage through the next process.
J. Pitzer: And Dave, roughly speaking, how did the de-bookings break down
by product line?
D. Ranhoff: By product line, it was 75 percent or so mixed signal, about
16 percent logic, 8 percent memory.
J. Pitzer: And then maybe a question for John here; can you talk about
DSO targets going forward?
J. Detwiler: DSO targets -- we would probably like to stay where we are
now, at least for the next quarter. We wouldn't want to get
any worse. If you look back to the bottom of the last down
cycle, we got into the 130 day-something range, and that's
about where we are right now. And we really wouldn't want to
get any worse than that.
J. Pitzer: And John, follow-up on the inventory write-down question; is
that mostly raw material WIP or finished goods?
J. Detwiler: It's broken down into what I think of as three categories.
About 40 percent of it was for the logic product lines, and
much of that is raw material. Forty percent of that is in the
mixed signal product lines. And that is a very general
provision. And it's really aimed at the sheer volume of
inventory that we have, as opposed to necessarily finished
goods, future commitments, and work in process. So, it's more
of what I think of as a pure volume provision. And then the
last 20 percent tends to be specific and it's mostly work in
process and components.
J. Pitzer: And then just one quick follow-up question, maybe for Graham.
Graham, when you talk about the two wins in the flash market
with IDM to support it, can you just remind us where you think
your competitive advantage is in the flash market and why you
picked up these two new customers this quarter, in your
opinion?
G. Siddall: We--one of the key differentiators we have, John, is really in
this link from the same solution from design through pro [sp]
through package. And we believe we're the only AT supplier
that provides that, so the main reason I believe we're winning
a large number of these new accounts is because they see a
real advantage; they can bring personal Kaloses in, put them
with their engineers for time-to-market, they can use that
same solution economically at probe and that same solution
economically at package. And we believe that is one of our
most compelling advantages.
J. Pitzer: Great. Thanks, guys.
Operator: Gentlemen, that is all the time that we do have for the
question and answer session. Please continue with the
presentation or any closing remarks.
Man: We have no further closing remarks. We just want to thank
everybody for joining us today and thank Keith. And we look
forward to talking to you again next quarter. Thanks.
CREDENCE
Res. #18562036
Moderator: Graham Siddall
May 16, 2001\4:00 p.m. MT
Page 24
Operator: Ladies and gentlemen, that does conclude the conference call for
today. We thank you for your participation and ask that you
please disconnect your lines.
CREDENCE
Res. #18562036
Moderator: Graham Siddall
May 16, 2001\4:00 p.m. MT
Page 25
At points of the call that were inaudible, we have put a note either stating
[inaudible] or [unintelligible] or denoted by a short blank line. Names
not appearing on our list of participants are queried with [sp] on first
reference.