Teradyne is a leading provider of automated test equipment. The
company's fourth-quarter earnings beat the Zacks Consensus Estimate
although forward guidance was disappointing, impacted by weakness
in the SoC test business. A recovery in the core semiconductor
business (processors, MCUs and power management), long-term
opportunities in the high-growth wireless test market, growing
memory market exposure, product lineup, lean cost structure and
strong balance sheet are positives. However, excess capacity and
pricing pressure could remain near-term headwinds. We are therefore
reiterating our Neutral rating on TER shares.
Headquartered in North Reading, Mass., Teradyne Inc. (TER) is a
leading provider of automated test equipment. The company is
primarily focused on the semiconductor test market, which generates
the bulk of its revenues. It also provides specialized system
testing equipment for specific end markets.
The semiconductor test product line primarily consists of the
FLEX platform (including the IG-XL software operating system
enabling single or simultaneous testing of semiconductor devices),
the J750 testing system based on the IG-XL software (for very
high-volume testing, as required for microprocessors) the Magnum
test platform (enabling testing of memory devices produced in very
large quantities) and the ETS platform (focused on analog/mixed
signal discrete devices that usually have a lower pin count for
testing through the proprietary SmartPin technology). The installed
base of FLEX systems is currently more than 3,500, while that of
Magnum systems and ETS systems is more than 1,300 and 2900,
respectively. Additionally, the company also offers a broad range
of services across the world that helps in the deployment and
functioning of its testing systems. Customers primarily consist of
semiconductor manufacturers, whether integrated device
manufacturers (IDMs) or foundries, as well as outsourced assembly
and test subcontractors (OSATs). This segment generated 71% of
revenues in fiscal year 2013.
The company has leveraged its expertise in semiconductor testing
systems to expand into system testing for military/aerospace
instrumentation, hard disk drives, printed circuit boards
(including in-circuit test and x-ray inspection) and automotive
system diagnosis. This segment accounted for 18% of 2013
The remaining 11% came from the wireless test business, which
basically represents the LitePoint acquisition.
The largest chunk of revenues is generated in Asia, which
accounted for 53% of revenues in 2013. This was followed by China
with a 23% revenue share, U.S. with 16%, Europe with 6% and the
rest of the world with 2%. Revenues improved across most regions,
although some Asian countries, such as Korea, Thailand and the
Teradyne has a large number of competitors, given its
comprehensive product portfolio. The company's semiconductor test
systems compete with those from Advantest Corp, Verigy and LTX
Credence Corporation. The Systems Test products are pitted against
offerings from Agilent Technologies and Xyratex.
Teradyne Inc. (TER): Read the Full Research
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