Your point is well made.
Anyone who has worked in the chip business for consumer applications knows the primary mantra is faster and cheaper. Veeco's new reactor addresses that by offering a significantly lower cost of ownership. This has been a major driver of Veeco's impressive share gains.
Perhaps the shorts and a number of Veeco Analysts, who are waiting for LED pricing to stabilize before becoming more bullish, just don't get it?
The EPIK reactor has a 40% lower cost-of-ownership than the 1400 reactors Veeco and Aixtron shipped in 2010-11. There are another 300 reactors shipped before 2010 and are even less efficient. Further declines in LED prices will force some LED manufacturers to either retool with more efficient tools or close their doors.
This scenario has been played out time-and-time again in virtually every chip industry that supplies chips for consumer devices.
So it's time for the shorts and some Analysts to finally wake up and smell the coffee. Those waiting for LED chip prices to stabilize before becoming more bullish will be left in the dust, again.
"Couple years ago, a tough critic here was saying the problem with VECO is that LED makers have acquired a big overcapacity of MOCVD machines and thus the demand for more machines would be small for some time to come"
I was probably one of the posters preaching that tune. Today, at Tier 1 LED manufacturers, capacity utilization has rebounded from 40% to around 90% at Tier 1 manufacturers in China, Taiwan, and Korea. Capacity utilization at manufacturers with older, less efficient equipment is running below that level.
"Wonder where we are in this process today? Has that cycle played out and is there now perhaps a prospect of some good sales going forward?"
You have to be careful here since things have changed over the past three years. First of all, Veeco's new EPIK tool produces about twice as many LEDs/year as the legacy K465i tool it sold in 2010-11. Secondly, Veeco's share of the MOCVD tool market has grown from 40% in 2011 to almost 70% last quarter. Finally, general lighting is now the dominant application for LEDs versus Display/TV backlighting which drove LED sales in 2010-11.
Veeco projects a $1 B TAM for MOCVD tools by 2019, which based on estimates of 240-260 reactor shipments this year represents a 20% CAGR.
So to answer your question, we are in the early stages of a new growth cycle.
Another positive is that the EPIK systems offer higher margins than the MaxBright tools they replace. Last quarter, Veeco margins were up significantly and should continue to grow as shipments of EPIK tools increase.
One thing that hasn't changed is the lack of foresight by most of the Veeco Analysts. Three years ago, some notable investment bank Analysts continued to pump Veeco as it crashed from $57 to $22. Today, despite consensus expectations for a major earnings turnaround and higher margins, Veeco's shares are trading at a FOUR Year low???? Their common complaint-they want to see LED pricing stabilize before sticking their necks out.
How dumb is that?
While it's a combination of manipulation by the shorts and spineless money managers, if you would like to file a complaint I have a contact at FINRA in Rockville.
Several years ago you would see the same nonsense in the disk drive stocks which were being manipulated by some NYC/CT hedge fund shorts and their paid shill Analysts at certain investment banks. The STX CEO, and ex Bear Stearns investment banker, called them out and one of the ring leaders came under SEC investigation for a number of issues. Over the next 18 months, STX's shares doubled despite flat sales.
Hopefully, Veeco has given them a call?
Now watch the large spike downs on low volume to help the short traders close out their trades during the last 15 minutes of trading as the crime is completed.
Classic manipulation by a couple of sleaze ball hedge fund traders and a possibly dishonest market maker that even FINRA couldn't dispute.
Some old short trader "tricks of the trade" being used to push VECO down today.
1. Dropped $3 on the open on just 30,000 shares
2. Large downward spikes in the share price within seconds during the first 30 minutes of trading
3. Despite being down, up volume exceeding down volume currently
4. Several large upside trades
5. At precisely noon, an usually slow trading time, some traders came and spiked the shares down aggain after it went positive. .
Now Veeco just posted upside results, guided to order growth in 2H15 along with 35% top line growth in FY15, and posted higher margins. Stock is trading at a P/E of 8 on the CONSENSUS FY16 EPSnumber, after cash, and people are selling?
If it's not the hedge fund sleaze balls selling, then any PM selling this stock should be replaced by a dart throwing chimp!