Thursday, June 25, 2015

Seeking Alpha: Can KLAC Get Its Mojo Back?

Defensive is a word you have to use with some caution when talking about semiconductor equipment companies, but it is a word that has been applied to KLA-Tencor (NASDAQ:KLAC) in the past and with some reason. KLA-Tencor has historically been at, or near, the top of the industry list in terms of operating margins and the company has long held strong market share in its core inspection and metrology markets.

How much is defensive really worth, though? KLA-Tencor has outperformed Applied Materials (NASDAQ:AMAT) over the last five and ten years, but has lagged ASML (NASDAQ:ASML) and Lam Research (LCRX) and the comparisons get less favorable to KLAC at three years and one year. What's more, the company is acting a little strangely for a leader, seemingly backing away from actinic inspection and e-beam and potentially opening a door for rivals, and cutting staff going into a period that should see orders growing again.

If I thought KLA-Tencor were significantly undervalued I might be inclined to think of this as noise and opt to focus on the opportunities that should lie ahead at 10nm as Intel (NASDAQ:INTC) and TSMC (NYSE:TSM) look to ramp up spending. As it is, though, I have some concerns about KLA-Tencor's operating plan and the shares aren't cheap enough for me to ignore them.

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Can KLAC Get Its Mojo Back?

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