Dutch chip equipment maker ASML reported its lowest order quarterly intake in two years as overcapacity and falling prices for memory chips depressed demand, but predicted a rebound ahead.
The order level came in near the bottom of expectations, but shares in the world's largest maker of semiconductor lithography machines rose 0.8% on Wednesday as ASML said the quarter marked the bottom in new orders and repeated that 2007 would be a year of revenue growth.
"We have now seen the trough of the cycle," Rabo Securities analyst Frits de Vries said.
De Vries said ASML's backlog, which stood at 1.75 billion euros ($2.4 billion) at the start of the third quarter, was strong despite the low level of bookings, and ASML's high cash generation and commitment to shareholders return kept it attractive.
ASML, based in the southern Dutch town of Veldhoven, reported a second-quarter sales decline in line with analysts' average forecasts, while net profit came in above expectations.
In what it called a "challenging quarter for the semiconductor industry", ASML said its order intake of 30 systems, less than half of the first quarter's 62, included eight refurbished systems for a total bookings value of 399 million euros.
Analysts' forecasts for total order intake had ranged widely between 25 and 70 systems in a Reuters poll of 11 analysts, reflecting uncertainty over how hard ASML would be hit by spending cuts by makers of computer memory (DRAM) and flash memory.
"We are very pleased to have received a sizeable number of new orders, in spite of expected cautious demand from memory manufacturers following their aggressive bookings in previous quarters," Chief Executive Eric Meurice said in a statement.
Shares in ASML were up 0.8% at 21.37 euros after touching 21.72 euros earlier in the session. They have been supported by a 960 million euro cash return to shareholders, announced in May and approved at a shareholders meeting on Tuesday.
ASML is trading at around 15 times estimated 2008 earnings, compared with multiples of 17 for Canon and 21 for Nikon, according to data compiled by Reuters Estimates.
The company said it planned to ship 59 systems in the third quarter with an average selling price (ASP) of 14.7 million euros for new systems and an ASP for all systems of 13.8 million euros. It forecast a gross margin of 40 to 41%.
Shipments of its newest and most advanced machine, dubbed 1900i, will amount to about 15 for the rest of the year.
ASML, which competes with Japan's Nikon and Canon, said second-quarter sales fell 2.6% to 935 million euros from the previous three months, in line with an average forecast of 935 million euros.
Net profit rose 5% from the first quarter to 161 million euros ($222 million) and compared with an average forecast of 154 million euros in a Reuters poll of 15 analysts.
ASML's customers include the world's largest chip maker Intel and Taiwan Semiconductor Manufacturing, the world's largest contract chip maker.