Japanese ATE vendor Advantest Corp. said taht it was revising its current fiscal year revenue forecast downward, as well as its projection for net income.
The company has previously anticipated net sales of approximately $2.4 billion (250 billion yen) and net income of approximately $412.9 million (43 billion yen) for the fiscal year, which ends on March 31st in Japan. The company now expects net sales to total approximately $2.3 billion (241 billion yen) and net income of approximately $374.5 billion (39 billion yen) for the fiscal year.
Those numbers are still well above the prior fiscal year's net sales of approximately $1.7 billion (174.2 billion yen) and net income of approximately $166.1 million (17.3 billion yen).
Advantest said that the market for digital test applications has been declining since last autumn, and this, along with a corresponding tighter inventory controls of IT related products, resulted in a loss of momentum in semiconductor capital investment. Since the company's Q3 report was released, investment continues to be limited, Advantest said, and it anticipates sales of semiconductor test equipment will be less than what was previously forecasted.
Wall Street market research firm Goldman Sachs Inc. believes it is the memory market that is dampening Advantest's outlook. In a research note this morning Goldman Sachs analysts noted that Advantest derives more than 50 percent of its revenues from memory test.
"We believe that the negative preannouncement was driven by weakness at the company's memory customers," analyst Jim Covello said in a statement. "Our Global team's checks suggest that Advantest had been comfortable with its guidance in early February, so the weakness likely emerged in the last month or so. We believe weaker tester orders from memory customers are being driven in part by a fall off in DRAM pricing (DRAM spot prices are down about 30 percent in only the first two and a half months of 2005 vs. expectations for a 30 percent decline for the full year).
"Importantly, we believe investors should take note of the negative preannouncement as the back-end typically is a leading indicator for the front-end given that tester equipment has significantly shorter lead times," Covello continued. "We therefore believe that one important potential read-through from the negative preannouncement is that memory customers are considering cutting back on their original intended front-end capacity additions in the coming months."
However, Goldman Sachs suggested that logic test orders are bottoming-out and that the back-end supply-demand dynamics are improving, citing that back-end shipments are below their normalized levels, even as front-end process tools remain above normalized levels
