Can a company survive an 80 percent drop in sales? Apparently it can, at least if the drop doesnâ''t last too long.
ASML, which makes the lithography tools that chipmakers need to make chips, had Q1 sales this year of just $184 million, compared to $919 million in 2008.
But back on April 15th, Aaron Hand reported in Semiconductor International that things should start to pick up.
Second-quarter sales are expected to fall in the range of â'¬210-230 million, but more considerable pick-up in demand is figured for the second half of the year, when ASML expects quarterly revenues to reach â'¬400-500 million to enable customersâ'' shrink roadmaps.
Transitions to new nodes are forcing installed base upgrades, [CEO Eric] Meurice said. â''As of last year, only the leaders had invested a bit of capacity in 45 nm flash, 55 nm DRAM, or 45 nm foundry logic. The rest of market is now organizing their conversions during this year, 2009. And during this year, the leaders themselves, who had already started these conversions, are now involved in even more aggressive conversion â'' namely 35 nm flash and 45 nm DRAM development. And these things will materialize also this year.â'' Improved foundry capacity utilization and Taiwanese DRAM consolidation are also enabling the current level of activity, Meurice said.
(By the way, if you get all confused about flash versus DRAM node sizes, as it happens, Bill Arnold, ASMLâ''s chief scientist, sorted it all out in this monthâ''s Spectrum in Shrinking Possibilities.)
Anyway sure enough, the Wall Street Journal reported on Friday that
European semiconductor companies will be hoping the worst of the slump may be over after Intel Corp. (INTC), the world's largest chip maker, recently indicated that sales of personal computers bottomed out during the first quarter.
Apple Inc. (AAPL) also reported a surprise gain in net income for its second fiscal quarter Wednesday, as sales of the company's iPod and iPhone products came in ahead of expectations.
Still, chip companies may have some time to wait for a full recovery. Microsoft Corp.'s (MSFT) chief financial officer Chris Liddell said Thursday he sees no immediate letup in the difficult trading environment, warning that it will persist through this quarter and "potentially through the calendar year."
The view from Microsoft may a bit misleading, though, and thereâ''s no contradiction in the disparate fortunes of Apple and Microsoft. In fact, on Saturday Daniweb columnist Ron Miller commented on that very thing.
The quarterly numbers are in the books for Google, Apple and Microsoft , and while Apple and Google made money, Microsoft failed to report a profit for the first time in 23 years as a public company.
It seems unfathomable that Apple continued to do well in this recession, but as I wrote on Thursday in Apple Earnings Continue to Defy Logic, while Apple's computer sales dipped, and iPod revenue (as opposed to sales) remained flat, the iPhone and the App Store carried the day. Meanwhile, the National Business Review reports that at a recent earnings call Google reported a very respectable 8.9 percent increase in profits.
Microsoft on the other hand had a devastatingly bad quarter compared to its biggest rivals. Microsoft's reported 32 percent profit plunge was all the more shocking since they had never reported a loss as a public company.
Ron shouldnâ''t be entirely surprised. Last July, Francis McInerney, corporate analyst and investor extraordinaire, explained exactly why Appleâ''s star was on the rise, and Microsoftâ''s was falling.
A Tale of Two Innovators
New York â'' Here is an intriguing tale of two innovators. Apple gets a NORTH RIVER MANAGEMENT GRADE A+ and Microsoft gets an A-. Since 1999, Apple has seen sales grow by four times and stock by fifteen times. Microsoft, by contrast, has seen sales grow 2.7 times and its stock fall 40%. The big difference: how they innovate.
Apple has a well-defined brand message: we manage your entertainment. Microsoft once had a clear message: we manage your work experience. But, once the company attacked Netscape with its Explorer web browser in 1995, the company lost its way and fell into a â''Let a thousand flowers bloomâ'' strategy. The latest thing is to be in the search and advertising businesses. Why? Who knows. But it is what it is.
The results are startling. Apple will overtake Microsoft in sales in about 24 months. If current sales multiples hold â'' no sure thing â'' the company would be worth $417 billion. Microsoft would be worth $343 billion, though probably less because its market cap to sales ratio is falling with its stock price. Either way, it is likely that Apple will be worth more than Microsoft in the foreseeable future.
Microsoft still has the higher market cap, but the Q1 results make clear that McInerney had spotted the key trend correctly. Itâ''s not clear what the lesson is in all this, but well-managed companies, like Apple, Google, and ASML seem to be pulling through the economic crisis.