ASML Holding N.V. (ASML) Q3 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen thank you for standing by, and welcome to the ASML 2012 Third Quarter Results Conference Call on October 17, 2012. For our today’s introduction, all participants will be in a listen-only mode. After ASML’s introduction, there will be an opportunity to ask questions. (Operator Instructions) I would now like to turn the conference over to Mr. Craig DeYoung. Go ahead please, sir.

Thank you, operator, and good afternoon and good morning ladies and gentlemen. This is Craig DeYoung, Vice President of Investor Relations here at ASML. And I would like to welcome to our investor call and webcast. Joining me today from our headquarters here in Veldhoven, in the Netherlands is Eric Meurice, ASML’s CEO, and Peter Wennink, ASML’s CFO. As the operator mentioned, today’s call subject is ASML’s third quarter 2012 results. However, as you now know, we’ve also announced our intent to acquire Cymer today and therefore, we’d be happy to answer any questions you might have on either subject as we proceed with the call. At this time, I would like to draw your attention to the Safe Harbor statement contained in today’s press release and in our third quarter results presentation both of which you can find on our website at asml.com. This Safe Harbor statement will apply to this call and all associated presentation materials. Let me remind you that the length of today’s call is 60 minutes. And now I would like to turn the call over to Eric Meurice for a brief introduction.

Yeah, thank you, Craig. Good afternoon. Good morning. Thank you for attending our third quarter results conference call. Before we begin as usual the Q&A session, Peter and I would like to provide an overview and some commentary on our third quarter results and our view going forward, as well as providing some commentary on the Cymer acquisition proposal. As usual Peter will start with a review of Q3, I will comment on the short-term outlook, brief outlook on the overview of the Cymer deal. I will complete the introduction with some further comments and update on EUV program and more details on the intent of the Cymer deal. So peter please?

Thank you, Eric, and welcome to everyone. As mentioned by Eric, I will focus on the review of our third quarter results, which are very much in line with expectations and we’ll close off with a brief overview of the all the announcements we’ve made judging today with Cymer. A quick look at our third quarter, sales results show us coming in at about €1.23 billion, just above our guided level. This is very much in line with the previous quarter. This quarter sales remained largely skewed towards the foundry IDM sectors, which accounted for about 70%, including non-critical KrF systems, which supported the capacity additions. Memory combined represented about 30%. This percentage seems high when looking at the state of the memory market, but we recognized a few leading-edge evaluation systems as sales in the third quarter that were shift in prior quarters. This issue also affected the memory bookings in the quarter last as these are recognized as turns business. In addition, there is increasing uncertainty in the last few quarters as to the application for which these systems are used, which lead us to combined memory sales and bookings data DRAM and NAND in our presentation materials this quarter. The ASP of all system recognized in Q3 was €35 million, which is an increase of about 10% from the previous quarter. Service and field option sales remained at healthy level of around €230 million. Q3 net bookings came in at €830 million for 33 systems, excluding EUV. We have booked average selling prices at around €25 million versus €22 million in the second quarter. The quarter’s bookings profile was skewed by the turns business of evaluation systems as mentioned previously. Our order backlog at end of Q3 was €1.34 billion, excluding EUV totaling 48 systems. The backlog…

Thank you, Peter. Let me in fact focus my comments on the planned acquisition of Cymer. This move is designed to achieve in fact three things. First thing is to derisk and accelerate the Extreme Ultraviolet, EUV technology roadmap. Second thing is to give a similar positive impact of a steady and growing service business. And the third facet is to improve our financials through the benefit of vertical integration and of synergies. So let’s go back and discuss these throughputs. Regarding the objective of overall derisking and accelerating EUV development as well as creating synergies; we believe that this merger will enable significant execution performance improvement. First, it will help taking duplication out of development. Responsibility for each key module like the vessel, the CO2 laser, the C laser, control software, algorithm et cetera, et cetera will be assigned to only one sight without fear of IP know-how transfer control with no need to duplicate or to distribute development ownership in a non-optimized fashion. The development will also benefit from the flexibility of larger pull of dedicated talents, dedicated experts. Secondly reducing the complexity of manufacturing and test flows, module will be manufactured in numbers of Centers of Excellence, of course in San Diego, Veldhoven and at our key suppliers. They will then be integrated and qualify as a system near the scanner or at the customer site. This will save the cost and time of assembly and testing at to the different locations. Regarding the objective of improving our financial prospects, of course part of it comes with the synergies and efficiency I just talked about. But also by integrating such a high value component of the total machine, we will certainly increase our gross margin, mathematically, while we’ll scale R&D and SG&A structures through the synergies, thus…

Thank you, Eric. Ladies and gentlemen, the operator will instruct you momentarily on the protocol for the Q&A session. But as always and I know there is a lot of questions about both the results and the Cymer acquisition details. But I would like to ask you, beg you to kindly limit yourself to one question with one short follow-up, so we can get as many in and I’m sure we’ll have the opportunity to answer a vast majority of your questions. So now operator, if we could have your instructions and then the first question please.

Thank you, Mr. DeYoung. (Operator Instructions) The first question comes from Mr. Didier Scemama. Please state your company name followed by your question. Didier Scemama – Merrill Lynch: Yeah, it’s Merrill Lynch. Good afternoon gentlemen. Thanks for taking my question. What I would like to understand and I think you sort of alluded to it earlier on Eric is you’ve been working with Cymer for some time on solving those light source issues. So can you just try to be a bit more explicit as to why you think that bringing Cymer in-house is going to help you reach the 60 or 70 wafer per hour throughputs you, what are the target? Thanks.

Yeah, we think that we would have progressed to result anyway with the current system of a deep corporation, but we also think that being merged, we’ll allow it to do this fast and with less risk, and with less potential conflict. It is clear that this is a very difficult project. If one of us would, one of the two partner would see things differently like one of us would protect IP, one of us would try to do something in parallel et cetera, you can create a risk of a fight, a risk of economic with a negotiation, which would be of no value for both, and also the human factor to get engineers to work together. So it’s better to put them into the same aquarium as supposed to different aquarium. So it’s an efficiency question. It’s also a business question. We are reaching the point, where being together we will reduce the risk of not achieving. And we felt on both sides of the companies that this was a right time to do so. Didier Scemama – Merrill Lynch: Great. And then Peter just quickly, did you say that the maximum dilution is going to be 5% in year one?

Yeah, that’s what we currently expect that is the year one after the closing, and so after the closing of the next 12 months after the closing, because it will take sometime to harvest the benefits as Eric alluded to in his opening speech. It will take sometime to fully get those benefits on board. So we believe that after 24 months after the closing that will be the case. So then you will see a 5% accretion. Didier Scemama – Merrill Lynch: Thank you.

The next question comes from Mr. Amit Harchandani. Please state your company name followed by your question. Amit Harchandani – Citigroup: Good afternoon. Amit Harchandani from Citigroup. Thanks for taking my question. Main one and a follow-up if I may. My first main question is, could you please talk about CapEx trend in each of your end markets and particularly if you have seen any early signs of CapEx plans at your customers being impacted by potential changes in manufacturing strategy by one of their customers? And as a follow-up, we’ve heard this talk about some of these technological factors such as DLC and 3D stacking impacting on NAND demand, could you maybe share your thoughts on that? Thank you.

Yeah. Well, the CapEx trend, I think Peter was clearly mentioning that at this moment, the logic business is clearly a roll. There is indeed discussion within the market about where the different players are manufacturing the project. And everybody knows that as discussion where Apple would have their different logic chip manufacturers et cetera, et cetera. All this is happening, however, we see a steady request for our machine for capacity, because 28 nanometer has not yet reached the level of capacity required necessary for just basic demand of these products, that will go up to June and we think these are strategic buys, they won’t move with markets short-term situations. And we have seen that 22 nanometer, which was immediately after 28 is in fact accelerated, because there is a war out there between the different architectures ARM versus microprocessor architectures, which pushes everybody to be even more aggressive in the logic arena in the shrink strategy. So why don’t you have a significant demand on 22 nanometer second half of the year. 7 : The trend, however, in memories is clearly, in fact, there is no trend. At this moment, it’s a dead duck business, there is no trend, but that doesn’t mean, it won’t come back. This is a key message we have to give. We don’t want to say that we loose something that the business in 2013 will not be sustained in the memory business no. I think we are saying that, there is absolutely no statistics as to where the PC business will be. And without any clarity on that number, I could understand our customers waiting to see how much DRAM capacity needs to be built, and how much NAND capacity needs to be built, because as you know, the new PC…

The next question comes from Mr. Gareth Jenkins. Please state your company name followed by your question. Gareth Jenkins – UBS: Yeah, it’s UBS. I have two very quick ones if I could. I just wanted on the fourth [right] new EUV tool orders. Could you just confirm that’s coming from the same end market as your prior one or the same customer, I should say and or is that completely new ones? And secondly I just wondered whether you could talk through how the evaluation of your bid for that the Cymer was constructed that you look at [all about the] capital, but you just look at the strategic value, could you look at accretion? What were the sort of metrics behind the valuation? Thank you.

So Peter is going to handle the valuation question regarding the EUV orders. DRAM is taking the first X-units, but logic is getting heated. Logic UV 2014 is going to be fairly huge R&D content, and then 2015 will be the ramp. So now the in terms of the first to say four units or so will be DRAM and after that we’ll go a full blown into logic. Peter for the valuation of...

Yeah, for the valuation, but it was pretty much based on the fundamental analysis of the business. We of course work in the same business, so we understand the business of Cymer quite well. They understand our business also very well as you know with every scanner, were it has one DPV light source. So with one EUV scanner, it will be one EUV source. So there was a lot of insight on both sides on let’s say, the fundamentals of the market that we are currently operating in. We basically looked at it from two sides, you have the EUV business, which is a business that is surrounded with like Eric said, still there is a lot of execution issues that you could call it execution risks, but there are also executional opportunities. But that is less straightforward than deep UV light source business with a very large service component. So a significant part of the fundamental evaluation can be attributed to the deep UV business, where of course there is a also potential significant part of evaluation for the EUV business, but there are still a lot of things need to happen and that of course could be realized when we put the two companies together for the reasons that Eric just talked about. Now after having done that fundamental analysis, we of course also look at where the share prices of the two companies were over the last three to six months. This is not the cash deal we believe that is largely a deal that will be paid in the shares of ASML, which makes it clear. This is from our point of very much a strategic deal. So we also look at the let’s say, three and six months premium based. So it would take the fundamental analysis and the valuation what kind of premium would that in the end represent. We came between 50% to 60%, if we take 50% on the six months on a three months basis and looking at precedent transactions for strategic acquisitions that falls right in the middle of those precedent transactions. So from both sides, I think from a premium analysis point of view, but very much from a fundamental evaluation point of view that’s how we came to where we are today.

And I think as I mentioned briefly to add to Peter is we also realized on both sides. I guess that there was negative value if we didn’t do it.

Yeah that’s correct.

So at the end of the day, we needed to resolve over the negative value. Gareth Jenkins – UBS: Just as a follow-up, I mean when do you best guess, do you think the deal closes and I guess is that related to anti-trust procedures I guess will occur?

Yeah, we have to go through few closing conditions. One of them is of course the shareholder approval of the Cymer shareholders. And we have to go through the regulatory approvals to our significant one will be on the anti-trust front, and the other will be a notification to the City’s Committee in the United States. Now all you can say in every jurisdiction almost pre-described timetables, but we would think that under normal conditions, we could have obtained those regulatory approvals within six months, also take into account the regulatory waiting and the view periods. But to be on the safe side, you never know with these things that we say at six to nine months, but of course we would be focusing on six months, but as nine months is a kind of worst-case scenario. Gareth Jenkins – UBS: Thanks, guys.

The next question comes from Mr. Mahesh Sanganeria. Please state your company name followed by your question. Mahesh Sanganeria – RBC Capital Markets: Thank you. The company name is RBC Capital Markets. Just staying on the anti-trust topic, how does your relationship change with other source supplier like Gigaphoton, does that become part of anti-trust issue?

No, in fact, I think this is the point to that, we are comfortable that there is no anti-trust issue at all. Two facets to your questions, one is, we do not choose who is the source is, supplier is our customer do. So for instance, Samsung or Intel or Toshiba or TSMC, would ask us, which supplier they would want us to have and then we qualify what they are requiring. So the future market share of Gigaphoton and or Cymer depends in fact on again their choice not ours. So we feel that this is a very important point to the authorities. And the second parties, indeed we want our division Cymer to be able to be independent in their approach to customers, which also includes our own competitors and therefore, they will be managed fairly independently. Mahesh Sanganeria – RBC Capital Markets: Okay. Then I have a follow-up on the power supply that EUV power supply state status. You mentioned that you are very comfortable with 30 watt operating as an independent and you have not integrated. But how long can you, how long in the terms of time can you operate at 30 watt and how much is a downtime after you have the issue with the 30 watt. I’m just trying to get a sense of where are you in terms of the shipment of the 3300 with respect to the EUV source?

Yeah, this is a good question. The 30 watt position that I made was a laboratory experiment which is good enough, because we tried it for numbers of hours in different situation. So we are comfortable that it is replicable into the machine, however. We need to ship the machine with the new source to be qualifying the performance in the field in real situation. So that will happen sometime in the first or second quarter of 2013. But that issue is much less important. It has logistic problem. Yes, we’re going to make it exactly on time et cetera. But the fact that we now proven that we can do it, it’s just a question of execution. It’s not a question of risk of not achieving. So we’re not very worried about the issue of execution potential, execution logistic delays. This is not as important as proving that we can do it.

And then I’d like to add that throughput and let’s say wafers per hour is not a delivery specification. There is many on us, but this is not one of them. Mahesh Sanganeria – RBC Capital Markets: Okay. Thank you.

The next question comes from Mr. Sandeep Deshpande. Please state your company name followed by your question. Sandeep Deshpande – JPMorgan: Hi, a couple of questions from me. Firstly on the Cymer acquisition, I mean Cymer has other businesses and services, I mean unrelated to LCD et cetera, when does ASML intend to stay in these other businesses going forward. And how will they services the businesses, which they don’t have direct equipment exposure to? And then secondly within the ASML business itself, I mean one different thing that we’re seeing is that I mean NAND prices seem to be going up at a time when the orders in memory are pretty weak. So Eric, do you believe that NAND orders are likely to be coming in the couple of quarters or there is a clear disconnect between memory pricing now and the order intake?

Yes, so very good. So on your question of Cymer’s LCD small business, we will wait to hear from Cymer’s decision about whether they want to invest more, invest less or stay constant. We definitively would plan to have this group, this division as again independent division. And they would have to justify the business on their own. So at this moment clearly there would be no decision on our side. We will wait for close to have a proposal made by the current management of Cymer. Regarding the NAND orders, yes, we are seeing in fact our famous simulation system says that, we should start seeing some orders, but we don’t yet. And the real point at this moment is that, in the production environment, you can always squeeze a bit your environment, your production to get more out, so we see this is happening, but not yet to a level, where we would get orders, because again, nobody really can understand the capacity required by the PC environment. So this hasn’t triggered yet. Sandeep Deshpande – JPMorgan: Okay. Thank you

The next question comes from Mr. Sachin Shah. Please state your company name followed by your question. Sachin Shah – Tullett Prebon: Hi, good afternoon, thanks for taking my question, Tullett Prebon. I wanted to find out the stock consideration, so are these shares in the US, the ADR’s what actual, because there is couple of listings of them. So is it ASML US or UW, which actual shares are you going to be getting?

The issued shares will be New York shares, no ADR’s and those are listed on NASDAQ. If you want to ask the abbreviation, just need to look at, one of the people here to just find you the right abbreviation. But it will be New York shares, I think you are currently listed. Sachin Shah – Tullett Prebon: :

No. Sorry, it is US? Yeah, it is ASML US. Sachin Shah – Tullett Prebon: Okay. And on the regulatory side, I just want to go over that with you, CPS is required, US HSR is required and, I think Germany is also required. Can you just maybe go over some of the other regulatory approvals and just to confirm and walk through there are no concerns that you’re expecting?

Well, currently you are right. We don’t expect concerns at this moment, and it’s good to know that you’ve done the investigation into the anti-trust filing. This has to be in Germany, because I don’t know whether we have to come to that conclusion. But at least we would like to in fact, you can call our investor relation to, share your views on that particular point. But we are going through the areas and the territories where we do business. In every business, there are different thresholds of a business that we need to achieve, which will trigger a regulatory filing or not. So that is the process we’re currently through. We haven’t identified anything that causes us any concern. Sachin Shah – Tullett Prebon: Okay, fair enough. And so just to confirm that the stock component is not an election, it’s fixed?

Correct. Sachin Shah – Tullett Prebon: It’s already listed on the New York Stock Exchange?

Yes. Sachin Shah – Tullett Prebon: Okay, perfect. Thank you.

The next question comes from Andrew Gardiner. Please state your company name followed by your question. Andrew Gardiner – Barclays Capital: Thank you very much. It’s Barclays. My question again around the Cymer transaction, I’m just wondering if there are any restrictions in your ability to continue cooperating and working so closely with Cymer in terms of the development to the EUV source, now that you’ve entered into an agreement to acquire the company. Are there any issues in terms of making sure, you stay at ARMs length from each other or have you got enough, I suppose processes in place already that you can continue the development as is? I’m just thinking my concerns around the timeline of EUV development that’s all. And also in relation to the acquisition, how do you come to the decision around the stock versus cash split?

Yes, I will let Peter discuss a stock versus cash. The restriction to operate, no we’re not very worried. Of course we understand a jump the gun situation. We have to continue our relationship as a separate entity, and we are planning to do so. But remember, this is a relationship of customer supplier. So it is natural that the supplier does some work with the customer and vice versa. We have already X years of cooperation. So all this is just the same type of behavior potentially improve, but not because of the merger, just because we are in a situation of cooperation. I believe the law would to be concern to us if there was a risk that either of the two companies would reduce or lose members of rights or assets during this transition period that’s not case. We will be sure that Cymer’s assets are let’s say, respected and protected and same for us. But again we don’t think there is any significant restriction of operation that would be of concern to the law.

Yeah, with respect your question, how do we come to the consideration stock and cash? Basically, when we looked at it, we said we work both companies, like I said earlier, we work in the same segment. We also I believe after I think talked to Cymer and Cymer listened talking to us. We identified that in the shareholder base of the two companies were very much a focus of the shareholders on similar issues like the success of the EUV program going forward and the value that could generate to the company going forward. So actually it appeared that both shareholders basis institutional investors focused on the semiconductor industry, especially at equipment industry with an understanding of where we are going with our technology choices. That made for us clear that a deal on the basis of, stock would actually be the most logical, because the institutional investor exposure would actually stay in fact at the same with regards to the industry that they are investing in. One of the request was that of course cash is always an attractive feature, but that should not be the, let’s say, main element of this consideration. We wanted to do that, but basically the majority we wanted to be in stock to reflect the strategic nature of this transaction and the cash was there to as an additional request and we were fine to do that. Andrew Gardiner – Barclays Capital: Okay. Thanks very much

The next question comes from Mr. Janardan Menon. Please state your company name followed by your question. Janardan Menon – Liberum Capital: Hi, it’s Liberum Capital. Just two questions, one is on the foundry side, on the logic side. I’m just wondering given that capacity at 28 nanometer is being ramped up as about 200,000 wafers this year and then to 300,000 wafers by middle of next year plus the 22 nanometer ramp in the second half of next year. If you just compare those two ramps without taking into consideration any other factors like, what end demand maybe et cetera. What would be foundry CapEx spending overall this year versus next year? Would that be a flattish trend, would that be up, or would that be down just based on the up to 200,000 this year and then 300,000? Of course, I agree that the, slightly unknown factor is the extent of the 22 nanometer ramp next year, but I presume you have some idea there. The second question is on the acquisition of Cymer. Does that preclude Ushio and Gigaphoton technology in your EUV roadmap. And if by some chance, if that is not the case and if one of them is successful then where does that leave your involvement with Cymer at the end of the day?

Yeah, I think it’s about flat. We expect about a flat logic business for us in lithography between 2012 and 2013 on the assumption that 22 nanometer and I think frankly, Craig would let you know for sure. But I think it’s 40K wafer capacity, which would be planned, so on that assumption, which is realistic. We would expect flat logic. But if it is more than 40K on 22 nano and there could be additional customer coming in 22 nanometer because the current plan that we have is a very limited numbers of customers would go into 22. So if there is another one then it would be on upside. Okay. Janardan Menon – Liberum Capital: Yeah.

The Gigaphoton issue in EUV, in fact we have discussed with Gigaphoton subject. We think that Gigaphoton’s business model has been to get into EUV, when EUV is more mature to get to this business as a follower. It is our understanding that they are still expecting to do so, and therefore when they get into the business, they will then benefit from what I explained it before, which was equal opportunity or based on the decisions made by the earned customer. So in other terms, in this business it’s obvious that we did not expect this before the merger plan that the two would come early. We always expected Giga to be a follower, and this new concept doesn’t change that. We are going to make sure that our division Cymer is indeed going to get this EUV machine early enough and cost effectively. And then in two, three, four years or whatever Giga will come in when EUV is, in fact it is a big business in which case everybody would be happy. Janardan Menon – Liberum Capital: Okay, got it. Thank you very much.

The next question comes from Stephane Houri. Please state your company name followed by your question. Stephane Houri – Natixis Securities: Yes, good afternoon. Stephane Houri, Natixis. I have a quick question if I may. I was looking at your statements about EUV for next year and in fact that it would represent around €700 million, which makes an ASP of around €63 million. Did you have to grant some discount because the throughput is not at the level expected or is there an element which is missing for me?

No, there is no discount there, because the throughput like I said is not a delivery specification. But we will have some accounting deferrals on that. And there is also one of those systems is going to be an R&D system, which is going to be booked as a credit into the R&D line. But we will be a bit of accounting accrual what we normally have with some, but it is largely defect that’s one of those systems is not in the sales line, but it is in the R&D line. Stephane Houri – Natixis Securities: Okay. And where should we put the first delivery, will be in Q1 or Q2, do you a clear idea about that?

We are planning from Q1. Stephane Houri – Natixis Securities: Q1, okay. Thank you very much.

You’re welcome.

The next question comes from Mr. Mehdi Hosseini. Please state your company name followed by your question Mehdi Hosseini – Susquehanna Financial Group: Thank you. My first question has to do with Cymer. I’m just curious to hear your thoughts as to what was the incremental catalyst for this transaction to happen over the past several years, there have been a number of challenges in commercializing EUV. As a matter of fact ASML has put in place your own technologies at Cymer site to help with migration or commercialization of EUV. But what happened over the past couple of months that pushed you over the edge and cause this transaction to happen? And I have a follow-up.

Yes, this is a very good question. So of course in the mind of a manager, there is always two things, one is market timing do we buy at the wrong place, wrong time and the other one which is in fact much more important is as it make sense business wise? So we of course looked at both on market timing issues and valuation and stuff which will unfortunately have to go through sometimes. We also we’ve looked at times where our share versus Cymer shares went up and down and et cetera. And you will notice that if you do this, the ratio of share to share today is not a bad time versus a year-ago, versus two years ago. So we did manage this so that there is no bad timing versus valuation. It’s never the perfect timing, but we thought we think that today is not ridiculous. Being, however, the master decision has been the business. And yes, I have to be honest with you, there are two models. One is a model that says, we are out of the source business, and we benefit from that as we benefit for instance to be out of the lens business, Zeiss is out, and we benefit from that. There is a good P&L compatibility, but sometimes they have bad time, we have bad time et cetera. And all this is well-organized and we also benefit from being separate. In the case of a source business, we saw that there could be some times, where it’s better to be out, it’s better to benefit from a fight between Ushio, Gigaphoton, Cymer. It’s better to also have them have a different cycle than we have et cetera, et cetera. And then we also looked at the positive of moving…

Yeah, it was more than natural evolution that’s what Eric is saying, and finding it out step-by-step this was the best solution. This doesn’t happen from one day to the other. This is a slow and it work like an evolutionary process. Mehdi Hosseini – Susquehanna Financial Group: Got it. Thanks for detail color. Just one quick follow-up rather clarification, you did say that that you think that there will be 300,000 wafer per month of additional or incremental logic capacity added by middle of next year. Does that mean that the logic related bookings could decline in early 2013 or am I missing something here?

Yeah, no I don’t think. So first of all, in logic where we mentioned a numbers of wafer per month. We do that because the logic business goes towards a ramp up from zero to some level, which is be either 200,000 wafers or 300,000 wafers. They have done this for 15 years or something. Every node gets to this, but the old node remains in action. So in other terms, an engine controller on 65 nanometer is still there. So 65 nanometer, I think it is 300K wafer per month and it was remain there. So now you got a new business called 28 nanometer, which is a new chip and in this case as you know, these chips are basically the once you used in mobile stuff. And that will reach a level of 300,000 wafers and if I’m not mistaken 14 nanometer will only be 200 nanometer, 14 nanometer…

200...

200,000.

Yeah.

240 nanometer is a small node, 28 nanometer is a big node as 300.

And that will till the middle of next year that’s what I’ve said.

Yes, to built up, and then that thing will stay in production for 100 years afterwards. Now the bookings, well 100 years is a poetic license. The bookings however, yeah we still need some bookings to make that up, up to June. But then it will be raising bookings when the 22 nanometer pops up and that’s not yet booked for us and when NAND and DRAM comes back. So we do not know when that pickup is going to happen, it’s an obvious pickup, it is going to happen. Will it happen in Q4, will it happen in Q4? We don’t know. Mehdi Hosseini – Susquehanna Financial Group: Got it. Thank you.

The next question comes from Mr. Simon Schäfer. Please state your company name followed by your question. Simon Schäfer – Goldman Sachs: Yes, thanks very much. It’s Goldman Sachs. Actually just wanted to go back on my question of sort of time to get a sense is to where you think cross-cycle profitability now is? The premise of the question is that you clearly mentioned that the proposed Cymer transaction is margin accretive at the gross margin level. I think that’s obvious from a multiyear perspective. And knowing the financials and then, I think you’ve obviously also referred to the likelihood that the customer investment program is gross margin accretive just because you do need to get compensation for the increased R&D level. So my question is, cross-cycle, historically, I guess in the last five or six years, you were looking at a study to maybe 45% type of gross margin range. By going forward, if and when the cycle may recover, what sort of margin uplift you think you are looking at, and if you could split that between the customer investment program and the proposed Cymer deal that would be very, very helpful? Thank you.

Yeah, I think you are right. And Eric, alluded to that going forward, especially when EUV kicks in, there is going to be a significant component in cost of goods that is now going to add to the gross margin, which is clear, because we don’t need to buy it in. So that is going to in the EUV area, especially in 2015, 2016 when EUV will start to ramp, we’ll have a big impact on the gross margin, that is for sure. And we talk about the big impact you could see, you could think about, let’s say, gross margins anywhere between 45% and 50%, so that we will move towards that range. Now, what the impact will be at that same time of the operating margin, that has to do with how quickly and I mentioned that how quickly we can get to the synergies that we see, basically, it’s a more efficient R&D, it’s simplifying the manufacturing processes, simplifying the sourcing strategies. Yeah, you have to realize that a big part of the sourcing chain for Cymer, EUV is similar to what the ASML sourcing chain, so there is a lot of opportunity for also synergies there. Now, we made a preliminary calculation, the only thing I can say if we put the two companies together and you look at what we have now identified a synergy that we can achieve, we say, well, after 24 months after closing and say closing happen somewhere in 2013. So it’s at the end of 2015 area, you would see on the basis of the combination of the two companies, there is about a 5% in accretion of the earnings per share. I think but if you now ask me Peter, what does that mean in terms of your gross margin and your SG&A, I have an idea. But I think it is not opportune right now to give you all that detail, because there is a still a couple of things that are open. I just want to give you, let’s say, and the impact on the EPS the way we see it today and I would like to keep it there, but the couple of things happen. Gross margin will go up and also there will be more efficiency on the operating expense line. Simon Schäfer – Goldman Sachs: It makes sense, thanks. But I guess just to clarify the five points that you called out that includes both Cymer and the customer investment program?

Yeah. Simon Schäfer – Goldman Sachs: Got it, okay. Thank you very much.

All right, ladies and gentlemen I’m afraid we’ve run out of time. If you were unable to get through with the question on this particular call, please feel free to contact the ASML guys here in Veldhoven and in the U.S. We do ask that as you can imagine, there is an extraordinary number of calls that we’re handling this evening here in the Netherlands and this afternoon in the U.S., so if you can just be patient and bear with us. But we would really appreciate that. So now on behalf of ASML’s Board of Management, I’d like to thank you for joining us on today’s call. And Operator, if you would firmly conclude the call for us, we would appreciate that. Thank you.