Player Avatar NetscribeBasMtrl (22.87) Submitted: 12/29/2006 4:08:47 AM : Outperform Start Price: $23.93 CCMP Score: +22.48

Cabot Microelectronics Corporation (CCPM) is a leading supplier of high performance polishing slurries used in the manufacture of integrated circuit (IC) devices within the semiconductor industry, in a process called chemical mechanical planarization (CMP). In recent years, the company has expanded its offerings to include polishing pads for IC fabrication and slurries for disk drive applications.

The CMP slurry market is underway to become more fragmented due to the growing number of new applications and materials used within semiconductor devices as well as the increased desire for custom slurry solutions from the customers. It is believed that this trend is to company’s advantage due to its dominant position in the slurry market as well as its significant level of resources that can be put to task to develop new process solutions.

In addition to growing internally, CCMP is expanding through acquisitions including QED Technologies, Inc. (QED), contributing around $5 million to its top-line in recent concluded quarter. As the semiconductor industry recovers in 2006 following a downturn in 2005, revenue for fiscal 2006 increased by around 18%, and is expected to follow the suite with an average growth rate of 15-16% next year. With multi-year supply agreements in its tally, the company is aggressively working upon higher operating margins.

As pad development and customer acceptance are progressing, CCMP is strategically focusing on polishing pad segment, which offers higher margins. With the company looking for investments in demand driven Taiwan and other Asian markets, a positive operating environment is well anticipated for the company.

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