Goldman Keeps 'Underperform' on Credence Systems

Analyst James Covello cites a wider-than-expected loss amid disappointing chip-testing equipment orders

Goldman Sachs keeps its underperform rating on Credence Systems (CMOS ).

Analyst James Covello says Credence's 35 cents fourth-quarter loss was a penny per share wider than his estimate, as higher revenues were offset by higher interest and other expenses. He notes the chip-testing equipment maker's $61 million in gross orders was below his $65 million estimate.

Covello believes front-end companies offer greater operating leverage than back-end companies, and says Credence's path to profitability remains a concern due to the competitive landscape in back-end companies, as well as potentially permanent pricing pressure.