Oppenheimer Maintains Underperform On Verigy

Oppenheimer has published a research report on Verigy Ltd. VRGY after the company reported in-line 4Q results. In the report, Oppenheimer writes "VRGY reported in-line F4Q (Oct) results and guided F1Q (Jan) rev/EPS down meaningfully. Given the recent rash of negative datapoints—1) Oct back-end/test bookings down 23% M/M, 2) TER Q3 test orders -44% Q/Q, 3) publicly disclosed wirebonder push-outs—we expected the ugly FQ1 guide (rev down >25% Q/Q, EPS near breakeven). Where VRGY sets itself apart from most peers is the seemingly indefensibility of its model: once things cracked, the company is instantly back to break-even (or worse) profitability. Layering in the all-stock LTXC merger, which we view as more dilutive than necessary and indicative of potential cash-burn qtrs ahead, we maintain our Underperform rating and overall negative bias on back-end/test stocks; still prefer TER for back-end/test exposure." Oppenheimer maintains its Underperform rating and $7 price target. Verigy Ltd. closed yesterday at $8.45.