Tuesday, December 19, 2006

Calls of Note Part 4

- Morgan Stanley is positive on FormFactor (NASDAQ:FORM) saying their checks suggest new NAND product (Harmony) continues to gain momentum and recent checks affirm FORM is set to win a large NAND order from the Intel-Micron JV in Q4/Q1 and evaluations with Hynix are progressing at a smooth pace. Firm believes up-time performance, a proprietary and novel self-planarization technology (this is new), and product reliability are key differentiators.

On the DRAM front, MS believes the company is on-track to take test parrellization to a new level and introduce a one or two-touch DRAM solution in the 1H07.

On the DRAM competitive front, they agree with the bears that FORM will face more competition in 2007 and beyond as customers push for dual-source, but they disagree that it will have a meaningful impact next year. Moreover, the firm believes the bears are overlooking the significant learning curve and higher levels of complexity associated with DRAM testing (versus NAND) that competitors will have to overcome once they pass the evaluation stage.

Notes they would be buyers of FORM at current levels. With less than 5% down-side from current levels and upside of more than 30%+ to our stock price target, they continue to believe that investors who are waiting for a better entry point could be disappointed. Consequently, the firm maintains Overweight-V on form and it remains one of the top picks in the coverage universe.

Notablecalls: Can't say I'm too excited about FORM here. Not actionable but good to know category.

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