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What's Good for Semiconductors is Good for KLA-Tencor

It's not a name that rolls off your lips, but KLA-Tencor has been riding the wave of the semiconductor boom. It seems that the demand for semiconductors is endless. However, in order to meet the demand, there is a desperate need for products that make semiconductor production faster, more efficient and less prone to defects. This is what KLA-Tencor does best. The company's products have such exotic functions as: reticle and photomask defect inspection; wafer overlay; overall yield and fab-wide data analysis; in-line wafer defect monitoring; and so on. What's more, the company even has a management consulting practice to advise companies on best practices.

On the face of it, KLA-Tencor is a young company, formed in May 1997. The company was actually the result of a merger of KLA Instruments and Tencor Instruments. Both of these companies have more than 20-years of experience.

Last week, the company reported its financials and they were impressive. In the past quarter, the company had revenues of $482 million, with net income of $92 million. This compared to $234 million in revenues in the same period last year and $26 million in net income. Basically, every product showed growth in the past quarter. Moreover, the CEO announced that there were record bookings in the past quarter (but he did not specify the amount). The biggest seller though was for wafer inspection - for both e-beam and optical networks.

And there is no problem in terms of cash. The bank account was at $964 million.

The demand for KLA-Tencor's products should continue to grow rapidly. There are myriad of factors driving this: reduced life cycles; hypercompetition; increased complexity; and the shrinking of geometries. For example, a single device may now have five or more functions that were once separate products. Such things will mean that KLA-Tencor will have no shortage of business.