LED toolmaker Veeco remains hopeful despite profit lag

Income and revenue have slowed for the Plainview-based LED toolmaking company Veeco Instruments Inc., due in part to tighter commercial credit in China, lessened demand for PC hard disks, and a slowdown in flat-screen TV backlighting production.

Despite the slowdown, Veeco said it expects long-term improvement within a more promising niche in the LED market, solid-state lighting, as prices fall and light-emitting diodes come into increasing use in homes, businesses and streetlights.

But the company said market conditions for the next few quarters will likely cause sales to lag for its equipment, which is also used to make solar power cells.

For the quarter ended Sept. 30 the company reported making $52.6 million on sales of $268 million, down from $93.7 million on $277.1 million in the same quarter last year. The result was a drop in per-share earnings to $1.31 from $2.22.

By midday Tuesday Veeco's stock was down $0.76 to $26.29. The stock has dropped 38 percent so far this year. It has 900 employees and a $1 billion market capitalization.

Veeco tool prices start at around $2 million each for single-reactor models. It also makes multi-station machines with modular two- or four-reactor production chambers. The company said it expects to make and sell more than 5,000 reactors in the next five years.

About $220 million of Veeco's sales in the quarter came from its metalorganic chemical vapour deposition equipment, which uses nano-scale layers of hardened gases to build conductive chips and LEDs.

In context, Veeco has done well, given "the challenging overall business environment, particularly in China, where customer facility readiness and credit tightening remain significant issues," Veeco chief executive John R. Peeler said in a news release.

"Our current expectation is orders will remain depressed for a few quarters," he said.

In spite of the slowdown in backlighting and personal computer production, demand for other types of LED components continues to increase, he said.

"We expect wide-spread adoption of LED lighting led first by the commercial, municipal and industrial sectors, which make up 75 percent of the lighting market, followed by residential users as economic benefits of using LED-based products become more apparent," he said.