ASML's lumpy chip equipment orders cloud outlook

AMSTERDAM Wed Apr 18, 2012 8:00am EDT

ASML's logo is seen on the day of the presentation of the 2011 fourth quarter and annual results in Veldhoven January 18, 2012. REUTERS/Robin van Lonkhuijsen

ASML's logo is seen on the day of the presentation of the 2011 fourth quarter and annual results in Veldhoven January 18, 2012.

Credit: Reuters/Robin van Lonkhuijsen

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AMSTERDAM (Reuters) - The world's leading chip equipment maker ASML expects steady sales, driven by demand for hot consumer gadgets such as smartphones and tablets, but said it was hard to predict exactly when orders would arrive.

The Dutch company declined to give an orders outlook on Wednesday, disappointing some investors who had recently pushed the stock to a 11.5-year high.

As the world's largest maker of semiconductor lithography machines, ASML is seen as a barometer for the tech sector, and investors had been expecting it to give guidance on orders.

ASML, which competes with Japanese groups Canon and Nikon, said it expects steady sales over the next six to nine months. But a shift to fewer, bigger customers had made it hard to predict exactly when orders would be made.

"The firm reiterated guidance for first-half revenues of 2.4 billion euros and also said that third-quarter sales should be stable at first-half levels - good as bears saw some deceleration in the second half," Jefferies Intl analysts said in a note.

ASML's customers, which include Samsung Electronics, Taiwan Semiconductor Manufacturing (TSMC) and Intel Corp, tend to "place big orders of a couple of hundred millions," Peter Wennink, chief financial officer, said in a webcast interview.

"We have to deal with fewer but bigger customers over the last couple of years, and those customers place bigger but lumpier orders," Wennink said.

Shares in ASML, whose machines map out electronic circuits on silicon wafers, were down 3.9 percent at 36.425 euros at 1034 GMT, off an 11.5-year high of 38.3 euros hit on April 2.

Philip Scholte, analyst at Rabobank, said that investors may have turned more cautious in the absence of a bookings outlook.

Others pointed out that the stock had done well recently, hitting the highest level since October 2000 on expectations of a strong quarter and was ripe for profit-taking.

"That just reflects their record strong performance, the share has done very well," Niels de Zwart, analyst at ING, said.

CHIP DEMAND

ASML said it expected second-quarter sales of 1.2 billion euros, compared with 1.252 billion euros in the first quarter, and that third-quarter sales would be stable.

"We feel confident when we look at the market ... for the remainder of this year, we remain positive," Wennink said, although the fourth quarter was still somewhat uncertain.

"Chips go straight into the things that are currently very hot and that is everything that has to do with mobile, media, and internet, so you have to think about smartphones, tablets."

This month, research firm Gartner said it expected global IT spending to rise 2.5 percent to $3.7 trillion. Growth will be supported by the popularity of smartphones and an improved global economy, Gartner said.

Chipmaker Intel reported earnings on Tuesday, saying sales would accelerate in the second half of the year with a powerful new PC processor and warned that costs associated with ramping up new production lines would hurt gross margins more than expected.

The long-time technology bellwether is ramping up production of its newest PC processor, codenamed Ivy Bridge, which is expected to power a new crop of super-thin laptops dubbed "ultrabooks.

TSMC, Samsung and SK hynix are also eyeing record investments and big acquisitions as they vie for a bigger share of the booming mobile market.

TSMC, the world's top contract chipmaker, said this month it would increase 2012 capital spending and also invest more than T$350 billion ($11.9 billion) in advanced production technology in Tainan, southern Taiwan, over the coming years.

The Dutch company reported first-quarter net profit of 282 million euros, slightly above the average forecast of 278 million euros. Sales were slightly above a forecast for 1.209 billion euros.

(Editing by David Cowell and Erica Billingham)

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