Analysts covering

Orbotech

(Nasdaq:ORBK) and investors were biting their nails ahead of the company's first quarter report. Accustomed to Orbotech beating forecasts, there was concern that this time it might be hampered by the industry slowdown. In May the company took the unusual step of issuing a placating announcement that all was well. But it cautiously added that it could not anticipate how the changes in the global economy would affect its results for the year.

So far so good: Orbotech, which makes equipment for the printed circuit board industry, reported a 27% jump in first quarter revenue to $104.9 million.

But when compared with the fourth quarter, it's not that good: then Orbotech recorded revenue of $105 million. Moreover, Orbotech's revenues did not beat forecasts. They did comply with the company's guidance, but missed a prediction by Salomon Smith Barney, of $106 million.

Net income for the quarter was $21 million, or 65 cents per diluted share, up 30% from the first quarter of 2000 when it netted $16.6 million or 50 cents per diluted share. Here Orbotech did its trick of beating forecasts, albeit by only one cent.

Equipment sales to the printed circuit board industry relating to bare PCBs were $57.2 million, an increase from the $46.5 million recorded in the first quarter of 2000. Sales of flat panel display inspection equipment were $19.2 million, an increase compared to $12.6 million in the same period last year.

Sales of equipment to the PCB industry relating to assembled PCBs were $6.6 million, compared to $4.3 million in the first quarter of last year. Sales of inspection equipment for IC packaging substrates for ball grid arrays were $1.3 million.

On a geographical basis, the company said it experienced growth in all regions, with a particularly good performance in Japan and Europe. Gross and operating margins remained strong.

CFO Amichai Steinberg professed to be pleased with the company's results. "These days, meeting forecasts is equivalent to beating them by 20%," he said, "and remember, we hadn't lowered our forecasts."

TheMarker.com: What about the second quarter?

Steinberg:

The uncertainty is persisting, even growing. We are preparing for the possibility that growth will be slower in the second quarter than in this quarter. That doesn't mean it will be, though.

What are your projected figures?

We're preparing for a quarter with $90 million revenues (about the amount posted for the second quarter of 2000 SG). The situation is murky. But in general, the future looks promising. Orbotech's products are a must. You can't make telephones or computers without inspection and scanning equipment. At the end of the day, people will keep buying these products, hence our optimism.

Sales of FDP inspection equipment is still growing despite the slowdown.

Right. This area posted record sales in this quarter. The picture in the flat panel displays department is much the same as the picture in electronics, where the potential is enormous. There is overcapacity, but the feeling in the market is improving.

What do the efficiency measures you announced in March entail?

We are devoting most of our fresh investment to R&D and customer support, while reducing investment in internal support at the company and at organizations abroad. We are not firing staff now. During the first quarter we hired 150 people in Israel and abroad. We intend to come out of the slowdown stronger.

Orbotech today has 1,860 people on the payroll, half of whom work at the company's facility in Yavneh.