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Amkor Technologies Inc. (NASDAQ: AMKR)

Amkor Technology Inc. (AMKR) is a subcontractor of semiconductor packaging and test services. The Company’s packages are designed for application specific body size and electrical connection requirements to provide optimal electrical connectivity and thermal performance. The Company offers flip chip and wafer level packages in which the semiconductor die is connected directly to the package substrate or system board; three dimensional (3D) package-on-package and stacked chip scale packages in which the individual chips or individual packages are stacked vertically to provide integration of logic and memory; advanced leadframe packages, which are thinner and smaller packages; multi-chip or system-in-package modules used in mobile phones and other handheld end-products; and packages for micro-electromechanical system devices that are used in automotive, industrial and consumer electronics markets. It also provides a line of advanced probe and final test services for analog, digital, logic, mixed signal and radio frequency semiconductor devices. Its customers include Altera Corporation; Atmel Corporation; Infineon Technologies AG; Intel Corporation; International Business Machines Corp. (IBM); LSI Corp.; ST Microelectronics Pte.; Texas Instruments Inc.; Toshiba Corporation and Qualcomm Inc.

The Company was founded in 1968 and is headquartered in Chandler, Arizona.

Source:https://trading.scottrade.com/quotesresearch/ScottradeResearch.aspx?symbol=AMKR, http://www.reuters.com/finance/stocks/incomeStatement?stmtType=INC&perType=INT&symbol=AMKR.O http://www.amkor.com/

Financial Summary

Gross margin for the three months ended June 30, 2009, and 2008 was 20.2% and 23.0%, respectively. AMKR experienced a decline in gross margin for the three months ended June 30, 2009, primarily due to the lower levels of demand, which have significantly decreased its capacity utilization rates. In addition, cost of sales for the three months ended June 30, 2009, included a charge of $6.7 million for termination benefits, contractual obligations and other exit costs related to management’s decision to wind-down and exit manufacturing operations in Singapore. Gross margin for the three months ended June 30, 2009, benefitted from other cost reduction initiatives and the strength of the U.S. dollar against certain foreign currencies.

AMKR’s net income for the three months ended June 30, 2009, was $9.2 million, or $0.05 per diluted share, compared with AMKR’s net income of $65.2 million, or $0.33 per diluted share, for the three months ended June 30, 2008. The net income for the three months ended June 30, 2009, includes a $6.0 million net foreign currency loss from the re-measurement of certain subsidiaries’ balance sheet items compared to an $11.6 million net foreign currency gain in the three months ended June 30, 2008. The net income for the three months ended June 30, 2009, also includes a gain of $7.9 million related to the repurchase of an aggregate $76.2 million principal amount of our 7.125% senior notes and $68.0 million principal amount of our 2.5% convertible senior subordinated notes due in 2011. Also reflected in the net income for the three months ended June 30, 2009, is a $7.2 million charge in connection with the plan to exit manufacturing operations in Singapore.

AMKR’s capital additions totaled $27.4 million in the three months ended June 30, 2009. Because of the significantly reduced level of consumer demand, capital additions are focused on specific customer requirements, technology advancements and cost reduction programs.

As part of the Company’s focus on generating cash flow and driving greater factory and administrative efficiencies, beginning in 2008 and continuing into 2009, it implemented cost reduction measures that include lowering executive and certain other employee compensation, reducing employee and contractor headcount, and shortening work weeks. Some costs previously reduced through cost reduction measures have increased as demand increased in the three months ended June 30, 2009. AMKR has also reduced its expected levels of capital additions in 2009 to an estimated $150 million, which is below its 2008 levels. The Company generated $69.4 million of free cash flow in the three months ended June 30, 2009, but it experienced negative free cash flow in the six months ended June 30, 2009, primarily as a result of approximately $103.8 million of payments made in the three months ended March 31, 2009 relating to the resolution of a patent license dispute and employee benefit and separation payments. Cash provided by operating activities was $33.4 million for the six months ended June 30, 2009, as compared with $284.7 million for the six months ended June 30, 2008. AMKR defines free cash flow as net cash provided by operating activities less investing activities related to the acquisition of property, plant and equipment. Free cash flow is not defined by U.S. generally accepted accounting principles (“U.S. GAAP”) and a reconciliation of free cash flow to net cash provided by operating activities is set forth under SEC filings.

AMKR believes its financial position and liquidity are sufficient to fund its operating activities for at least the next 12 months. In April 2009, it amended its $100.0 million first lien revolving credit facility which, among other things, extended the maturity date from November 2009 to April 2013. Also, in April 2009, AMKR issued $250.0 million in 6.0% convertible senior subordinated notes due April 2014 (the “2014 Notes”). In the six months ended June 30, 2009, the Company repurchased in open market transactions $108.3 million in aggregate principal amount of its 7.125% senior notes due March 2011, and $69.0 million in aggregate principal amount of its 2.5% convertible senior subordinated notes due May 2011 using $158.8 million of cash on hand. At June 30, 2009, the Company’s cash and cash equivalents totaled approximately $455.3 million with an aggregate of $97.0 million of debt due through the end of 2010. In 2011, the remaining $144.3 million aggregate amount of its 2.5% convertible senior subordinated notes and 7.125% senior notes mature.

Net sales decreased $184.2 million, or 26.7%, to $506.5 million in the three months ended June 30, 2009 from $690.7 million in the three months ended June 30, 2008. This decline in net sales was due to the general decline in demand and inventory management efforts by AMKR’s customers as a result of the global economic recession and weakness in consumer spending. As a result, AMKR experienced a broad-based decline in product demand across its packaging and test businesses.

Gross profit decreased $56.5 million to $102.4 million, or 20.2% of net sales, in the three months ended June 30, 2009, from $158.9 million, or 23.0% of net sales, in the three months ended June 30, 2008. AMKR experienced a decline in gross margin in the three months ended June 30, 2009 primarily due to the lower levels of demand, which have significantly decreased its capacity utilization rates. In addition, included in its cost of sales in the three months ended June 30, 2009, is a charge of $7.1 million for exit activities primarily related to the wind-down and exit of manufacturing operations in Singapore. The decrease in gross profit and gross margin was partially offset by improved factory performance due to cost reduction initiatives and the favorable foreign currency effect on labor costs due to the depreciation of the Korean won and other currencies.

Despite the global economic recession, during the three months ended June 30, 2009, AMKR continued to invest in research and development activities, focusing on advanced laminate, flip chip and wafer level packaging services. Research and development expenses decreased $5.1 million to $10.0 million, or 2.0% of net sales in the three months ended June 30, 2009, from $15.1 million, or 2.2% of net sales in the three months ended June 30, 2008. The decrease in the Company’s research and development expenses was primarily due to lower salaries and benefits.

Source: http://phx.corporate-ir.net/phoenix.zhtml?c=115640&p=irol-sec

Analyst Consensus

This is the consensus forecast amongst 4 polled investment analysts. Against the Amkor Technology Inc company.

The 4 analysts offering 12 month price targets for AMKR have a median target of 6.63, with a high estimate of 8.00 and a low estimate of 5.50. The median estimate represents a 20.89% increase from the last price of 5.48.

Source: Financial Times.com

Source: http://www.reuters.com/finance/stocks/estimates?symbol=AMKR.O

Investment Highlights

AMKR recently announced that the Administrative Law Judge (“ALJ”) in its patent infringement case against Carsem in the International Trade Commission has reaffirmed his prior ruling that the Carsem Dual and Quad Flat No-Lead Packages infringe some of AMKR’s patent claims relating to MicroLeadFrame (MLF) technology, that all of AMKR’s asserted patent claims are valid, and that Carsem violated Section 337 of the Tariff Act.

Nakaya Microdevices Corporation, AMKR and Toshiba Corporation recently announced they have signed definitive agreements for the formation of a joint venture to provide semiconductor assembly and final testing services in Japan. NMD, AMKR and Toshiba entered into discussions regarding a possible joint venture at the start of this year. The announcement of  the agreement follows an April 28, 2009, memorandum of understanding between the parties. The new company is expected to begin operations on October 31.

Under the terms of the definitive agreements, NMD will become a joint venture, 60% owned by the existing shareholders of NMD, 30% by Amkor and 10% by Toshiba, and it will change its name to J-Devices Corporation (“J-Devices”). Under the definitive agreements, the following equipment and operations will be transferred to J-Devices: the back-end process business, including technology development, at Toshiba LSI Package Solutions Corporation (”TPACS”), a Japan-based semiconductor packaging company wholly owned by Toshiba; the system LSI and memory back-end process equipment at TPACS’ Oita Works and Fukuoka Works; and certain wafer probing equipment installed at Toshiba’s Oita Operations. TPACS’ employees working for the transferred business will engage in the same business at J-Devices.

AMKR is expected to invest approximately 1.5 billion JPY (approximately $17 million) in J-Devices and to purchase certain assembly and test equipment from Toshiba for about 4.0 billion JPY (approximately $45 million) and lease such equipment to J-Devices. Toshiba is expected to invest approximately 0.5 billion JPY. In addition, Amkor will have the right to acquire a majority interest in J-Devices in 2012. J-Devices aims to become a leading provider of semiconductor assembly and test services in Japan by combining the benefits of NMD’s low-cost operations, Amkor’s manufacturing expertise and global materials and component procurement capabilities, and Toshiba’s cutting-edge technology and know-how.

AMKR last month announced that pursuant to the succession plan approved by the board  of directors on June 25, 2009, James Kim, the company’s Founder and former CEO, has become executive chairman of the board of directors and Ken Joyce has assumed the position of CEO and president of the company.  Joyce has also joined the Company’s board of directors. Joyce joined AMKR in 1997 and was executive vice president and CFO for more than eight years before becoming chief administrative officer in November 2007, chief operating officer in February 2008 and president in May 2008.

Source: Scottrade.com, Reuters.com, Amkor.com

Technical Analysis

Source: www.stockcharts.com

Moving Average Price Compare

AMKR is trading below its 50 day moving average. However, this moving average is trending higher which suggests that there has been buying interest in this stock.

Bollinger Bands

AMKR’s recent volatility has been greater than normal. This is evidenced by the increased distance between the upper and lower Bollinger Bands. These bands measure volatility using standard deviation and a large width is due to high volatility. Additionally, AMKR is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.

MACD

The MACD for AMKR currently indicates a strong bearish signal for two reasons. First, the MACD is below the signal line, a 9day moving average. Second, the MACD is below the critical level of 0, which implies that the underlying moving averages are trending lower.

Comparative Analysis

Source: Reuter.com, Nasdaq.com

Insider Trading Activity

Net Share Purchase Activity

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