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Lam Research Corp. [stckqut]LCRX[/stckqut] on Wednesday announced a deal to buy KLA-Tencor Corp. [stckqut]KLAC[/stckqut] for $10.6 billion, the latest sign that consolidation pressures among chip makers have spread to their suppliers.

The two Silicon Valley companies rank among the biggest makers of equipment used in semiconductor manufacturing. Lam has focused on machines that deposit or etch away materials on the silicon wafers used to make computer chips. KLA-Tencor’s machines, by contrast, are used to spot defects in chips once the wafers are processed.

Such equipment makers have long been whipsawed by boom and bust cycles, as chip makers boost or cut back manufacturing capacity in response to demand. Acquisitions have been common over the years, as companies try to assemble a broader list of machines to sell customers.

Source: Chip merger frenzy continues with Lam purchase of KLA-Tencor

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Company name KLA-Tencor Corp
Stock ticker KLAC
Live stock price [stckqut]KLAC[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Fair
Sales growth Poor
EPS growth Poor
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Fair
Target stock price (TWCA growth scenario) $49.78
Target stock price (averages with growth) $45.33
Target stock price (averages with no growth) $26.15
Target stock price (manual assumptions) $56.18

The following company description is from Google Finance: http://www.google.com/finance?q=klac

KLA-Tencor Corporation (KLA-Tencor) is a supplier of process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries, and provides a comprehensive portfolio of defect inspection and metrology products, and related service, software and other offerings. The semiconductor industry is KLA-Tencor’s core focus. The Company’s products are used in a number of high technology industries, including the light emitting diode (LED) and data storage industries, as well as general materials research. Within its primary area of focus, the Company’s portfolio includes defect inspection and metrology products, and related service, software and other offerings, which helps integrated circuit (IC or chip) manufacturers manage yield throughout the entire semiconductor fabrication process.

 

Confident Investor comments: At this time, I think that a Confident Investor can cautiously invest in KLA-Tencor Corp as long as the price is correct. Most of the fundamentals of this company are good but there are some concerns. I am a little concerned that the growth has slowed too much so I am taking the company off of my Watch List.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of KLA-Tencor Corp calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
[s2If current_user_can(access_s2member_level1)]

In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

  • Stock price at the time of the calculation: $55.74
  • Growth: 0.1
  • Current EPS (TTM): $2.12
  • P/E: 26.5
  • Future EPS Calc: $3.41
  • Future Stock Price Calc: $90.47
  • Target stock price: $56.18

[/s2If]
I hope that this makes you a Confident Investor.

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Company name KLA-Tencor Corporation
Stock ticker KLAC
Live stock price [stckqut]KLAC[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $86.52
Target stock price (averages with growth) $112.58
Target stock price (averages with no growth) $90.13
Target stock price (manual assumptions) $78.46

The following company description is from Google Finance: http://www.google.com/finance?q=klac

KLA-Tencor Corporation (KLA-Tencor) is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor’s offerings include the Chip Manufacturing, Wafer Manufacturing, Reticle Manufacturing, Complementary Metal-Oxide-Semiconductor (CMOS) Image Sensors Manufacturing, Solar Manufacturing, light emitting diode (LED) Manufacturing, Data Storage Media/Head Manufacturing, Microelectromechanical Systems (MEMS) Manufacturing, and General Purpose/Lab Applications. It also provides refurbished KLA-Tencor tools as part of its K-T Certified program for customers manufacturing larger design-rule devices, as well as service and support for its products. The Company’s products are used in a number of other industries, including the LED, data storage and photovoltaic industries, as well as general materials research.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in KLA-Tencor Corporation.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor. You can review the best companies that I have found (and I probably invest my own money in most of these companies) in my Watch List.

How was this analysis of KLA-Tencor Corporation calculated?

For owners of my book, “The Confident Investor” I offer the following analysis (you must be logged in to this site as a book owner in order to see the following analysis). If you have registered and cannot see the balance of this article, make sure you are logged in and refresh your browser.
[s2If current_user_can(s2member_level1)]
In order to assist you in using the techniques of this book, the values that I used when calculating the Manual pricing above were:

Stock price at the time of the calculation: $63.1

Growth: 0.15

Current EPS (TTM): $3.49

P/E: 18

Future EPS Calc: $7.01

Future Stock Price Calc: $126.35

Target stock price: $78.45

I hope that this makes you a better investor. [/s2If]

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Company name KLA-Tencor Corporation
Stock ticker KLAC
Live stock price [stckqut]KLAC[/stckqut]
P/E compared to competitors Good

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Poor
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $88.02
Target stock price (averages with growth) $103.03
Target stock price (averages with no growth) $75.92
Target stock price (manual assumptions) $67.67

The following company description is from Google Finance: http://www.google.com/finance?q=klac

KLA-Tencor Corporation (KLA-Tencor) is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor’s offerings include the Chip Manufacturing, Wafer Manufacturing, Reticle Manufacturing, Complementary Metal-Oxide-Semiconductor (CMOS) Image Sensors Manufacturing, Solar Manufacturing, light emitting diode (LED) Manufacturing, Data Storage Media/Head Manufacturing, Microelectromechanical Systems (MEMS) Manufacturing, and General Purpose/Lab Applications. It also provides refurbished KLA-Tencor tools as part of its K-T Certified program for customers manufacturing larger design-rule devices, as well as service and support for its products. The Company’s products are used in a number of other industries, including the LED, data storage and photovoltaic industries, as well as general materials research.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in this stock.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.

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Company name KLA-Tencor Corporation
Stock ticker KLAC
Live stock price [stckqut]KLAC[/stckqut]
P/E compared to competitors Fair

MANAGEMENT EXECUTION

Employee productivity Good
Sales growth Fair
EPS growth Good
P/E growth Good
EBIT growth Good

ANALYSIS

Confident Investor Rating Good
Target stock price (TWCA growth scenario) $80.32
Target stock price (averages with growth) $97.55
Target stock price (averages with no growth) $75.1
Target stock price (manual assumptions) $69.72

The following company description is from Google Finance: http://www.google.com/finance?q=klac

KLA-Tencor Corporation (KLA-Tencor) is engaged in the design, manufacture and marketing of process control and yield management solutions for the semiconductor and related nanoelectronics industries. KLA-Tencor’s offerings include the Chip Manufacturing, Wafer Manufacturing, Reticle Manufacturing, Complementary Metal-Oxide-Semiconductor (CMOS) Image Sensors Manufacturing, Solar Manufacturing, light emitting diode (LED) Manufacturing, Data Storage Media/Head Manufacturing, Microelectromechanical Systems (MEMS) Manufacturing, and General Purpose/Lab Applications. It also provides refurbished KLA-Tencor tools as part of its K-T Certified program for customers manufacturing larger design-rule devices, as well as service and support for its products. The Company’s products are used in a number of other industries, including the LED, data storage and photovoltaic industries, as well as general materials research.

 

Confident Investor comments: At this price and at this time, I think that a Confident Investor can confidently invest in this stock.

If you would like to understand how to evaluate companies like I do on this site, please read my book, The Confident Investor.