ASM Int'l in the Right Direction

ASM International (ASMI) is an OEM [original equipment manufacturer] of both front-end and back-end semiconductor manufacturing equipment. The back-end business has gained significant momentum in the past two years, while the front end business has struggled to become profitable.

On June 6, 2008, Applied Materials Inc. (AMAT) offered to buy two of ASM's units for $400 million to $500 million. ASM has so far shunned all offers and the deal appears off for now.

Ironically, the front-end is now outperforming the back-end. We rate the shares of ASMI a Buy. Although back-end order strength indicates that the business will perform poorly in 2009, the balance sheet restructuring and lowering of break-even was a step in the right direction. Consequently, we are setting a target price of $10.00.

Read the full analyst report on ASML