Diversified semiconductor equipment maker Veeco Instruments (Nasdaq: VECO ) came up short when it reported its third-quarter results. Although the company did beat the Street's revenue estimate in the just-concluded quarter, depressing guidance sent the stock south by about 5%.
Let's put the company under the lens.
The quarter in brief
Revenue in the quarter fell slightly to $268 million from the year-ago period as soft demand for its LED and solar products trimmed down the top line. Moreover, it seems that the glut is here to stay, as bookings for Veeco's various product lines, which include LEDs, hard disk drives, and solar panels among others, took a beating. It must have been a nauseating situation for Veeco's shareholders when the company revealed a 52% decline in bookings across all product lines from last year.
The rocky road ahead
The global economic weakness is largely responsible for the company's poor performance. Veeco's products derive their demand from sales of televisions, PCs, and solar panels. Unfortunately, all three segments have seen their demand decline as end users are watching their money amid uncertain financial conditions. Therefore, manufacturers of these products have kept their orders on hold as they wait for the economy to recover. As far as solar panels are concerned, the year has been nothing short of a disaster for the industry, and Veeco of course couldn't escape it.
All the above-mentioned factors weigh heavily on the company's guidance for the ongoing quarter as it expects revenues in the range of $175 million to $210 million, lower than Street expectation of $238 million. The dim guidance doesn't come as a surprise, as we saw established players, like Cree (Nasdaq: CREE ) and Aixtron (Nasdaq: AIXG ) getting hammered last month, slashing their guidance by about 25% because of weak market conditions.
The Foolish takeaway
The company has endured a difficult year so far, and it looks like its woes may continue. Until and unless the economy looks better and TV manufacturers ramp up production of LED TVs, Veeco will be unable to arrest the slide in its revenues and profits. The company's stock may plunge further in the next earnings release, as it continues to reel from weak demand for its core products.
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