Advantest Q3 - sales higher but ATE margin hurting bottom line

Monday, 22 February 2010 22:37

Advantest's Q3 FY2009 Operating Income saw a sequential increase of 1.7 billion yen, however a higher sales ratio of products with comparatively low margins resulted in a larger operating loss of 5.0 billion yen. Overview and Order Breakdown There are mixed results in Advantest's latest quarter. At a high level their book to bill ratio exceeded 1.0 for the second consecutive quarter, and orders "continued to recover." Current book-to-bill is a healthy 1.37. Component test systems orders were 12.1 billion yen, up 57% from the previous quarter. T2000 (non memory) orders also increased. Advantest specifically pointed out that they expected T2000 orders to increase to, "customers other than Advantest's principal US customer." I think everyone knows who that is... Even though memory tester orders are, "in a robust uptrend" they finished flat with the previous quarter. Sales Breakdown Taiwan is clearly recovering. Sales for the T55xx series and memory handlers for DDR3 test, as well as orders for the T63xx for LCD driver IC test generated revenue in the current quarter resulting in a threefold increase from the previous quarter. Sales total to the region were 3.3 billion yen. Other regions totaled 3.2 billion yen, down 21% from the previous quarter. T2000 for MPU test decreased during the quarter. Balance Sheet Advantest's balance sheet still looks healthy, but continues to slip. Total assets declined 1.7 billion yen from the previous quarter to 185 billion yen. Cash and cash equivalents declined to 106.5 billion yen. To put this in perspective, this is down from a March 2007 peak of 196.4 billion yen. R&D Expenses It's worth looking at Advantest's R&D spending since the downturn hit ATE companies particularly hard. Through Q1-Q3 of FY2008 R&D expenses were running at about 6.5 billion yen per quarter. This dropped off in Q4 to 4.1. R&D has been flat since at around 4.3 billion yen per quarter. In their own words, "the company continues to maintain a minimum level of R&D spending." Last but not least... Outlook The outlook for Q4 is that operating profit is expected to recover to break even on sales of 20.3 billion yen. Demand for back-end testers for DDR3 is expected to increase, principally in Taiwan and South Korea. Also increased deliveries of non memory testers are expected with the main customers of the T65xx being Japanese consumer IC manufacturers, and the T2000 being (as stated earlier) customers other than large microprocessor vendors.