Rubicon Technology Inc (RBCN)

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Rubicon Technology, Inc. Provides Business Update
4:39p ET September 15, 2008 (Business Wire)
Rubicon Technology, Inc. (NASDAQ:RBCN), a leading provider of sapphire substrates and products to the LED, RFIC, Semiconductor, and Optical industries, today reported that a contract modification for a major silicon on sapphire (SoS) customer and the current slowdown in global market demand for 2" diameter LED wafers are expected to affect short term financial results.

Raja Parvez, CEO of Rubicon Technology, said, "As we discussed in our last quarterly conference call, we have been working with Peregrine Semiconductor, one of our major customers, to better understand their unique situation involving a buildup of their sapphire inventories. To assist them through this situation, we have agreed to shift the delivery of $4.3 million of product currently scheduled for 2008 into the first half of 2009. This action will allow us, under the circumstances, to better manage production schedules over the next several quarters to avoid down time, while also assisting our customer. The outlook for the SoS market remains strong with a growth rate that is expected to be about 50 percent per year for the next several years. We continue to be Peregrine's primary supplier and we are confident that, while we may be impacted in the short term, we will capitalize on our relationship to capture future sales."

Mr. Parvez added, "The slowdown in the handheld device and small display markets that use our small diameter LED wafers has affected customer orders throughout Asia. As a consequence, and as an accommodation to our customers, we have agreed to move some of the contracted volumes for the remainder of 2008 into the first half of 2009, which is when our customers believe the market will begin to strengthen. Our LED revenue from larger diameter material continues to be strong."

"Nevertheless, in combination, we are shifting nearly $7 million of product deliveries from this year into early next year which will reduce our financial results and our guidance on both revenue and earnings for the third and fourth quarters of 2008," noted Mr. Parvez.

Previous Guidance Revised Guidance 3rd Quarter Full Year 3rd Quarter 4th Quarter Full Year Revenue (in millions) $12.5 $47.0 - $49.0 $11.5 - $12.0 $8.0 - $8.5 $41.5 - $42.5 EPS $.11 $.43 - $.45 $.05 - $.07 $.01 - $.03 $.26 - $.30

Commenting on the outlook for the remaining quarters and full year, Bill Weissman, Rubicon's Chief Financial Officer, explained, "While we believe our gross margin will be in the 35% to 37% range in the third quarter, it will likely drop in the fourth quarter to the mid- 20% range given the larger deferral of orders for that period. During this period, we will retool some of our manufacturing operations by retiring old equipment and installing newer, more efficient equipment this year and early next year in order to reduce costs and increase throughput. Our revised guidance includes an anticipated write off of remaining book value of those assets to be retired of between $1.0 and $1.2 million in the third quarter. In addition, we recently met the major deliverables on our agreement to develop a new 8-inch SoS product and will benefit from milestone payments this year."

Long term Outlook Remains Strong

Mr. Parvez concluded, "Our products serve the exciting LED, SoS RFIC and Optical markets - all of which offer strong long-term growth potential. There is no viable substitute for sapphire in these applications and Rubicon continues to have the industry leading technology. LED chip manufacturers working on large diameter processing seem to be moving faster than we had anticipated. We continue to expect to benefit from future opportunities as one of the leaders in production of larger diameter substrates. Longer term, we will maximize shareholder value by continuing to invest in our facilities and technologies, ensuring our position in the marketplace as a provider of outstanding quality product and as an enduring partner with our customers."