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Friday, 04/18/2008 11:54:50 AM

Friday, April 18, 2008 11:54:50 AM

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UPDATE 1-RESEARCH ALERT-JPM cuts Cymer, ups MKS Instruments
Fri Apr 18, 2008 8:25am EDT

April 18 (Reuters) - J.P. Morgan Securities downgraded chip equipment maker Cymer Inc (CYMI.O: Quote, Profile, Research) and upgraded rival MKS Instruments Inc (MKSI.O: Quote, Profile, Research) to align its ratings to companies in U.S. chipmaker Applied Materials' (AMAT.O: Quote, Profile, Research) thin film solar and flat panel equipment supply chain.

The brokerage cut its rating on Cymer to "neutral" from "overweight," while raising MKS Instruments to "overweight" from "neutral."

MKS Instruments, whose largest customer is Applied Materials, sells residual gas analyzers that monitor greenhouse gas emissions and analyst Jay Deahna expects this business to double in 2008.

While Deahna believes in the long-term potential and technological leadership of Cymer, he expects the stock to be range bound until a clear recovery of demand and the company demonstrates stable or better four-quarter market share.

Deahna trimmed Cymer's earnings estimate for 2008, citing weak lithography orders in the first quarter.

He expects strong business in thin film solar to drive growth for MKS Instruments, which makes equipment used in producing microchips.

MKS Instruments is a safe solar play as revenue on most solar components is recognized on shipment and not upon meeting certain performance specifications or efficiency requirements of the panel, Deahna said. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Pratish Narayanan)

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