QUOTE AND NEWS
Market Intelligence Center  Sep 17  Comment 
KLA Tencor Corp (KLAC) presents a trading opportunity that offers a 3.36% return in just 94 days. A covered call on KLA Tencor at the $77.50 level expiring on Dec. '14 offers an assigned return rate of 3.36% or 13.05% annualized. This trade...
Market Intelligence Center  Sep 2  Comment 
MarketIntelligenceCenter.com’s patented algorithms have chosen the Dec. '14 $75.00 call for a couple of hedged-trading ideas on KLA Tencor Corp (KLAC). A traditional covered call on KLA Tencor yields 3.28% (10.97% annualized, for comparison...
Market Intelligence Center  Aug 29  Comment 
For a hedged play on KLA Tencor Corp (KLAC) MarketIntelligenceCenter.com’s patented trade-picking algorithms selected a Dec. '14 $75.00 covered call for a net debit in the $72.53 area. That is also the break-even stock price for the covered...
SeekingAlpha  Aug 18  Comment 
By Abba's Aces: The last time I analyzed KLA-Tencor Corporation (NASDAQ:KLAC) I stated, "Even though the company has been performing well from a stock price perspective lately, I will not be pulling the trigger on this name right now because I...
Market Intelligence Center  Aug 18  Comment 
KLA Tencor Corp (KLAC) was selected by MarketIntelligenceCenter.com’s trade-picking algorithms today after trading between $73.25 and $74.41 on Friday before closing at $74.07. A diagonal spread using a long position in the Jan. '16 $50.00 call...
The Market Financial  Aug 14  Comment 
The overall stock markets have recently had a nice bounce since hitting nearly 1900 on the S&P 500. One stock that has not really participated in this move up has been, KLA-Tencor Corporation (NASDAQ:KLAC). KLAC has basically been in a bit of a...
Market Intelligence Center  Aug 4  Comment 
KLA Tencor Corp (KLAC) was selected by MarketIntelligenceCenter.com’s trade-picking algorithms today after trading between $71.21 and $72.12 on Friday before closing at $71.63. A diagonal spread using a long position in the Jan. '16 $50.00 call...
Market Intelligence Center  Jul 30  Comment 
KLA Tencor Corp (KLAC) is a good candidate for a covered call at the $70.00 level. The Dec. '14 call at that price should fetch a credit of about $4.10, which means the entire position has a net debit of about $67.30. This trade has 3.85% downside...
SeekingAlpha  Jul 29  Comment 
By Arie Goren: KLA-Tencor Corporation's (NASDAQ:KLAC) has outperformed the market in the last years, but in my opinion, KLAC's stock still has plenty of room to move up. KLA-Tencor will benefit from a rebound in semiconductor manufacturing...
SeekingAlpha  Jul 28  Comment 
ByAbba's Aces: The last time I wrote about KLA-Tencor Corporation (NASDAQ:KLAC) I stated: "Even though the company has been performing well from a stock price perspective lately, I will not be pulling the trigger on this name right now because I...




 
TOP CONTRIBUTORS

With more than 50% market share, KLA-Tencor' (NASDAQ:KLAC) is the global leader of process diagnostics and control (PDC). KLA provides quality assurance tools in the form of testing equipment and software that can be used during various points in the semiconductor manufacturing process to increase yield and minimize defects. Semiconductor fabrication facilities (fabs) are more expensive than ever and chip design is becoming smaller and more complex. For these reasons, there is increased demand for PDC in order to increase production yield and minimize costly and time consuming defects.

Semiconductor demand has been elevated by the Commoditization of PCs, advanced chip design, and also increased demand from China. China is the world's largest emerging market and like most developing countries, China's rapid economic growth has created high demand for semiconductors and electronics. KLA's products are used by almost every major wafer and semiconductor manufacturer. Although KLA has maintained over 50% market share, the industry it competes in remains highly competitive. KLA faces competition from both established and new market entrants both of which could take valuable market share. This is an industry that relies heavily on improvement of product rather than lowering costs and competitors with greater resources could have an advantage.

Company Overview

KLA's products are used in semiconductor manufacturing, wafer manufacturing, and data storage. KLA helps manufacturers efficiently and effectively increase yield in the fabrication process through inspection and minimization of production defects. KLA is completely devoted to PDC and is the leading expert and innovator in this field.

KLA deals with metrology (measurement), inspection, and analysis of the production cycle. KLA provides its services in primarily two ways: software and equipment. KLA sells software that collects and interprets data from the production cycle in order to help maximize yield. KLA also sells process control equipment in which chips are sent through and inspected. Service and expertise from KLA engineers is also available at nearly every fab in the world. Several KLA products include:

  • Candela CS20: Automated wafer inspection system.
  • Archer XT+: Advanced optical metrology solution.
  • Viper 2435: Automated wafer and tool disposition.

Business Financials

In 2009, KLAC earned a total of $1.52 billion in total revenues. This was a significant decline from its 2008 total revenues of $2.52 billion. As a result, this had a severe negative impact for KLAC's net income. Between 2008 and 2009, KLAC's net income declined from a net profit of $359 million in 2008 to a net loss of $523 million in 2009.[1]

Trends and Forces

The Deeply Cyclical Semiconductor Industry

The semiconductor industry is subject to extreme volatility. Fluctuations in the global electronics market can cause a subsequent downturn or upturn in the semiconductor market. The demand and lifecycles of notable technologies such as the iPod/iPhone, next generation video game consoles, PDA's, and the newest computer systems can impact the quantity of semiconductors needed in a given year. In addition, semiconductor sales have shown about an 80% correlation with GDP growth trends, meaning a downturn in GDP growth could very likely be accompanied by a downturn in semiconductor sales.

The Complexity of Chip Design

KLA benefits hugely from the constant progression of chip design and, consequently, design complexity. Complex chip design has significantly increased the cost of building a fab (around $3 billion). The higher costs, in turn, forces semiconductor manufacturers to achieve higher production yields. This in turn benefits KLAC directly, because it increases the demand for KLAC's products. Similarly, manufacturing the chips has become more difficult and is more prone to errors. This too increases the need for PDC tools to minimize defects and wasted time.

2/3 of KLA Revenue Comes from Asia

About 66% of KLA revenues come from Asia due to the concentration of fabs there. Many semiconductor manufacturers are building fabs or outsourcing to fabs in parts of Asia, particularly Taiwan. Asia has lower overhead costs, and it is also convenient to be located near major electronics markets such as Japan and China. The large growth potential in China could be a major factor for semiconductor demand in years to come.

Competition

KLA commands over a 50% market share in PDC. KLA's sole focus and resources are for PDC. KLA has the largest PDC R&D budget and top tier expertise in the field. Some of KLA's largest competitors include:

References

  1. KLAC 10-K 2009 Item 6 Pg. 33
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