Lam Research Earnings Call Nuggets: DRAM & NAND Outlook, Earnings Guidance Details

Lam Research Corporation (NASDAQ:LRCX) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

DRAM & NAND Outlook

Patrick Ho – Stifel Nicolaus: Martin, first, in terms of the outlook you provided, on the memory side, can you give us a little bit of color in terms of what you’re going to see in the September quarter in terms of the mix between DRAM and NAND? Do you see any shifts there, or is it still going to be a little stronger towards the DRAM side for the September quarter?

Doug Bettinger – EVP and CFO: I’ll actually take – it’s Doug, Patrick. I’ll actually take that one. When you look at the back half of the year broadly, it’s going to be stronger in NAND than the first half was. DRAM was actually, we think, a little bit stronger in the first half than the second half. So when you go through the remainder of the calendar year, our expectation is memory’s going to be stronger in the second half, but it’s going to be a NAND story more than anything else.

Patrick Ho – Stifel Nicolaus: Maybe specifically for you in terms of the operating model, you did a pretty good job in terms of the June quarter on the OpEx line. I guess, how do you balance the continued investments in R&D, particularly when a lot of these process technology transitions, that we’re seeing today offsetting it on the SG&A line to keep that OpEx around that $300 million level mark you’ve talked about in the past.

Doug Bettinger – EVP and CFO: Yeah, Patrick, it’s a good question and it’s a delicate balancing act that the management team of the Company really gets paid to execute to. (indiscernible) got trade things off all the time. We do the best that we can to rationalize what we absolutely need to spend and not anymore on the administrative side such that we can spend a little bit more on R&D to invest in these technology inflections where we see market opportunity that have nice return, but you kind of work your work through at each quarter and you’ve got to make trade-offs and that’s what we’re doing today.

Earnings Guidance Details

Jim Covello – Goldman Sachs: Martin, I guess first question. Just in terms of kind of reconciling the bullishness that we heard from the whole industry at SEMICON West. We fast forward a couple of weeks to earnings and now a couple of companies maybe give guidance that doesn’t quite meet the Streets, September quarter numbers. Is that just a function of the Street being ahead of itself? Is it a function of the timing, because you did refer to the fact that the December quarter would be better? Has something changed? Has there been some movement since SEMICON West? Just, I think we’re all struggling a little bit with the difference between what we all thought we heard then and kind of what we’re seeing in the numbers now?

Martin Anstice – President and CEO: Yeah, I think that is pretty kind of normal, the subtleties of one quarter to another are pretty complex for any of us to get precisely right. But from our perspective, the tone that we’re communicating today qualitatively and quantitatively, we don’t regard in any way, shape or form is different from the conversation we had three to four weeks ago in our Analyst Meeting. I do think, and I kind of made a qualitative statement in my prepared comments about the December outlook. We don’t specifically give guidance for December, and I don’t really want to do that today. But if it helps put the September guidance in context, I would expect the shipments of our Company to exceed $1.1 billion in the December quarter, and in large part, that reflects the momentum in memory. And to Doug’s point, the dollars of investments in memory are very biased to NAND flash but the strength that we’re seeing – that showed up in the June quarter, first and foremost, but also repeat at some level in the second half is DRAM driven by the kind of mobile requirements there.

Jim Covello – Goldman Sachs: Then just in terms of pricing, particularly in etch, I mean, as always, when we go to see all the different companies, everybody in that says they are gaining share. Obviously the proof is in the pudding, and you guys have demonstrated that in the numbers that you are actually gaining share. But in an environment where everybody is trying to gain share, are you seeing anymore – everybody is trying to gain share – is there anymore pricing than normal in that area?

Martin Anstice – President and CEO: I don’t know if I would say frankly that the biggest influence over pricing is the competitive dynamic. I think the bigger influence over pricing frankly is the consolidation of the semiconductor industry and the fact that 65% to 70% of wafer fabrication equipment spending is in the hands of three companies today. So, on a case by case basis, I’m sure, any one of us feels an ebb and a flow of pricing intensity, but my fundamental impression today is that the competitive environment is exactly kind of where it has been and where we’d expect it to be and nothing kind of fundamental to report in terms of pricing for that reason today.

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