George Chamillard, Teradyne’s chairman and chief executive officer, commented At the time of our April earnings release, we were hopeful that our business would stabilize and that the levels of orders, cancellations and rescheduling of backlog would turn for the better. However, as the quarter progressed, the environment continued to deteriorate.
Our sales of $366 million for this quarter are approaching the level we experienced at the trough quarters of the 1998 slowdown. The loss — our first in over ten years, since the first quarter of 1991 – is an indication of just how dramatic and severe this downturn has been to date.
Based on conversations with a broad cross section of our customers, we see no upturn in the near future, Chamillard continued. Indications are that most semiconductor customers may not need to increase their test capacity until well into 2002. With that outlook, we expect revenue to be between $275 million and $325 million, with corresponding losses of between $0.22 to $0.32 per share, assuming no special charges.
In the current environment, Chamillard added, it is more important than ever to stay focused on the right priorities. I have said before that our focus is on supporting our customers, driving our new products into the marketplace and managing expenses. Those remain our priorities.
Despite the gloom and doom of the current environment, we remain optimistic about the business for three reasons. First, our new products are gaining new customers across a broad front. Our Catalyst Tiger high-end SOC test system, our Probe One DRAM wafer probe test system, our Celerity product for DSL line qualification and our new Netflare product for helping service providers reduce the time to resolve customer Internet connection problems all are gaining share for us in a tough market.
Second, our level of design-ins across all of our products and businesses indicates to us that our future market share ambitions will be met. Finally, I’m very optimistic about history. Teradyne has had a number of down years – 1971, 1975, 1985/1986, 1990 and 1996. Every one of these down years was followed by several years of strong growth. In fact, after three of these five downturns, we set a new sales record a year after the low. In the other two, 1975 and 1985/1986, it took two years to set a new record. In other words, when the business has snapped back in the past, it has snapped back quickly. As they say, Chamillard concluded, past performance is no guarantee of future results, but unless you believe that semiconductors and electronics manufacturing are no longer growth businesses, you’d have to regard what’s happening now as the calm before the next equipment buying storm.
