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Disciplined Aixtron hopeful of steady recovery

After a tough couple of years, a sharp increase in orders may signal a better 2006 for key MOCVD equipment vendor Aixtron.

Aixtron, the compound semiconductor industry's key supplier of MOCVD equipment, is hoping to break even in 2006 after recording a huge financial loss in 2005.

The Aachen, Germany, company, which believes it has a 60% share of the MOCVD equipment market, returned an overall net loss of €53.5 million ($64.4 million) in its 2005 financial year.

While much of that figure can be attributed to balance sheet adjustments that CEO Paul Hyland described as financial prudence, Aixtron said that its net loss would have been €14.6 million if recorded using standard US accounting methods.

Hyland said that "light" demand from customers, particularly LED manufacturers, had made the last two years among the most difficult in Aixtron's history - at a time when it has had the added complication of consolidating its acquisition of the atomic vapor deposition company Genus.

Overall, Aixtron's revenue remained flat at around €140 million from 2004 to 2005. However, this masked a big decrease in annual MOCVD reactor sales from €114.8 million to €80.9 million during the period.

Revenue from the new Genus business, which was negligible in 2004, accounted for 23% of sales in 2005, or €32.1 million.

Aixtron's disciplined response to the slack demand for its core products has been to cut staff numbers, introduce temporary plant closures and more common platforms, as well as to delay certain research projects. Those measures should have an impact on costs over the next year, during which Aixtron expects to break even on sales of around €150 million.

Though keen to remain cautious, Hyland pointed to a sudden jump in order intake in the final quarter of 2005 as a possible indication of a better year to come.

At €37.6 million, orders in the final quarter were double the equivalent three months in the previous year. Those figures were not influenced by the recent order for five MOCVD machines placed by Taiwan-based LED maker Epistar (see related story), which is being recorded in the first quarter of 2006.

Hyland and his colleagues will be hoping that the improving business environment is not a repeat of the "false dawn" witnessed in early 2004 when orders reached a similar peak before slumping back down.

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