Question-and-Answer Session
Operator
Thank you. [Operator Instructions].
Your first question comes from line of Robert Maire with Needham & Company. Please proceed.
Robert Maire - Needham & Company
Yes, by the way congratulations on very, very nice results. Couple of questions. Number one, could you tell us what impact the weak dollar, strong yen is having? I would imagine that helps you in Japan, even though in your prepared comments, you suggested that Japan becomes a smaller player overall. But I would imagine that helps you in pricing.
And second question is a little bit more broad. Your remaining US competitor came out with a new product set that they have been trying to gain some traction with. Are we now at a point where it's reasonable to assume that there hasn’t really been any acceptance or any traction at any significant number of customers for that product such that it's? I wouldn’t call it a failed product, but a product that really is not going to be a significant strength in the marketplace, and as such becomes sort of a stalking horse in the market. Related to that, does that suggest that you're getting to the 75% share as sort of the normal maximal share that a dominant player would have in the marketplace.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Shall do the tactical on Japan. The Japanese yen versus the US dollar is helpful and that contributes to our advantages in Japan where frankly, our products are getting really strong acceptance in Japan at this point, specifically our high current product which is tool to reckon everywhere else in the world. And we have sold high current tools at this point, sold them and then paid for four out of five top spenders in Japan, and we're expecting more production volumes in '08 for that product. And Gary might tackle the other question.
Gary E. Dickerson - Chief Executive Officer
Yes, I guess, one other thing on Japan, again, what we are doing there is transitioning those customers from the remaining customers that are running batch high current to single wafer and we had some announcements here recently of really important penetrations with large customers there. We are getting traction and that I think will become more evident over the next couple of quarters with some of the large suppliers in Japan.
Again, with batch to single wafer, there is a tremendous cost and yield advantage in making that transition. So, certainly it wasn’t as fast as we would have liked, but that transition definitely is picking up some steam in Japan.
On the competitive front, we are in very strong position versus the competition. As we talked about in the prepared remarks, we plan a record for all of the Fabs basically outside of Japan except for the former AMAT accounts. We are very confident we will transition those customers to Varian. And I think the advantages that we have with the ribbon that we have with the ribbon being dual magnet architecture that were evident in competing with spot beam single magnet, if anything, it's widening the gap with the competition on smaller design roles.
So I think we feel pretty good about the overall competitive situation
Robert Maire - Needham & Company
Would you say that the competitive offering has gained any traction at all, or is that sort of getting the order at this point or is it something that will be kept on by customers looking for sort of just second source or does that continue to fade as batch systems fade out.
Gary E. Dickerson - Chief Executive Officer
I think from a competing standpoint, truthfully, I don’t think there is much traction with the product. I don’t see many customers, I won't say no customers, but not many customers looking at splitting the business. Again matching between spot beam, single magnet system with a dual magnet ribbon beam is not easy to do, certainly for advanced designed roles. And again, the same reasons that we won, the particle count for yield is a bigger issue for smaller design roles, angle control, all of the things that from an architectural standpoint were real strengths for us. Again continuing with the current product that we are competing with. So yes, I think we are pretty optimistic about that situation.
Robert Maire - Needham & Company
So, that would mean you probably could potentially get almost 75% share eventually.
Gary E. Dickerson - Chief Executive Officer
I think so, yes
Robert Maire - Needham & Company
Okay, thank you
Operator
Your next question comes from the line of Weston Twigg with Pacific Crest. Please proceed
Weston Twigg - Pacific Crest
Hi, just a couple of questions. One, I was wondering if you could talk to me about the deferred revenue, the drop in deferred revenue from the June to September quarter and maybe give us an idea of how to look at that into the December quarter?
And then another question on PLAD. Just wondering if you can give us any more color on maybe the shipment level in December and maybe how early '08 looks in terms of PLAD sales.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
So, Wes, the drop from June to September was PLAd related, as we mentioned earlier. And there is little bit related also to a customer in Taiwan where we took relatively conservative position on revenue recognition. We feel good about that now. In terms of, into Q1, which is December for us, we see a drop of small amount, about $10 million, $11 million, little less than $10 million actually. Let's see. What else did you ask, Wes, a couple of questions there.
Weston Twigg - Pacific Crest
Just wondering, if you cold maybe give us better idea on the PLAD ramp in terms of? maybe the shipment levels?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes, so the PLAD, we mentioned we are going to? we revenued eight tools in September; we are going to revenue 12 tools in the December quarter. PLAD is basically a tool of record decisions at about five or six customers at this time. One has ramped production, the others are starting to ramp production. So PLAD should get pretty good acceptance to in '08, more levers than ?07 and still very strong position, particularly for dual polygate. Other applications are being explored now.
Weston Twigg - Pacific Crest
Okay. Thanks.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Welcome.
Operator
Your next question comes from the line of C.J. Muse with Lehman Brothers please proceed
C.J. Muse - Lehman Brothers
Good afternoon, a couple of questions here. I guess, to follow on the last question on PLAD, Bob, seven tools, quarterly run rate that implies $100 million plus annual revenues. Does that mean you think you can do a little better than kind of the $85 million that you pointed to in the past, in 2008?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes it is a little bit tricky, CJ. We have about five customers ramping, for five customers, six, I guess. And how many tools they take, and when they take, I am not sure. So I would say that the number is probably, I don’t know if we could beat the $100 million, frankly, but we don’t know yet for sure.
C.J. Muse - Lehman Brothers
Okay.
Gary E. Dickerson - Chief Executive Officer
One issue with this one is, in terms of our market position, we are very confident in our market position. Part of it depends on the spending for some of the memory customers. And so that’s I think more hard to predict. But certainly, again, in terms of adoption, that’s moving forward.
C.J. Muse - Lehman Brothers
Makes sense. I guess in terms of the gross margin outlook for 2008, December you guide a great number there. And I guess you alluded Bob to spares and higher ASP follow on to tools coming up, warrant driving that. Is that something that’s sustainable at that type of revenue level throughout calendar '08?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes, let me give you an answer fro that question, but let me give you some background about what I think is sort of going on in this space right now, because there's been a lot of news lately and it ties to that answer. There has been a lot of change in the last couple months. I mean there is a few customers that we have actually pulled and pushed the same tools out of the quarter several time, in the September quarter and the December quarter. And today I gave you explicit insight into the mix of our shipments in the December quarter, because we usually do that.
And if you remember, I said there was about 85% memory, 9% logic and 6% foundry in the December quarter. That’s kind of interesting because the logic number is sort of timing. It's only 9%, but we are going to get whatever business there is, we're just not shipping in the December quarter. The foundry is down at 6% and a major foundry customer, we've taken a relatively conservative stance in the December quarter. We have no shipments scheduled for them in the December quarter. Now they have pushed and pulled stuff in and out, a number of times in the last month or two. It's been pretty rapid. So we have taken a position. We're not sure, we're going to have any shipment to them this quarter to them.
What's the point of my discussion is that, one, things have been going through rapid change in the last month. I saw the emails from all the different people covering this space today, my take is we took a relatively appropriate stance on the quarter in terms of our guidance. What that ties to in gross margin is, we are trying to grind through all the new data everyday to find out where we're at. The underpinnings in our gross margins I feel good about, our cost reductions are going well, our competitive position's in great shape. Our spares and upgrades business are growing well. And PLADs are higher gross margin products. So all those are the fundamental underpinnings of improving gross margins. When I don’t have a good handle on the mix of what business we're going to have post December, because it's been more rapid change in the last month than probably I can remember. So the underpinnings are okay, but the mix issues are blurred to me right now.
C.J. Muse - Lehman Brothers
Okay. And on the market share front, you gave a number for 2009, and roughly 60% in year 2007. Where do you think you'll be exiting 2008?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
We have a guided to it. We're for 60% in ’07 and 75% say in ’09. I'd say we are part way there in '08. How much there, depends on the adoption of how fast we get revenue recognition in Japan, on the tools that ship and PLAD ramp and a little bit in the high energy thing too, which means we are going to get new tools into customers and get accepted. So it is a little bit dependent on acceptances.
C.J. Muse - Lehman Brothers
So it sounds like the magnitude of high energy in 2008 is more of the value of those tools in there and then revenue recognition really ramping up in 2009?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
I think so. I think that the AMAT is pretty predictable, the Japan high current is pretty predictable. But it goes into ’09, also, but it's pretty good in '08. I think the high energy is the hardest one to read. Because it takes a little while to get accepted, once in a while.
C.J. Muse - Lehman Brothers
Thank you very much.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Welcome.
Operator
Your next question comes from Jay Deahna with J.P. Morgan. Please proceed.
Jay Deahna - J.P. Morgan
Okay, thanks, good afternoon. Couple of questions. Gentlemen, first of all, hypothetically, if CapEx was flat next year, what kind of revenue growth could you do with your share gain and PLAD et cetera, that’s the first question.
The second question is keeping your leverage to Korea and big JV in Taiwan is probably going to start taking a lot of tools in the first quarter. Does that imply a reasonable expectation for up shipments in 1Q?
And then the last question is, you alluded to some upside in share gain potential form a flash manufacturer in Japan. When will that start to achieve volume production in shipments for you?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
You want me to start. I will do the last one first. The Japanese customer, we're hopeful we will be getting some orders in the December quarter. And as you probably know, typically that ships about a quarter later, whether we can revenue those because in Japan we don’t recognize anything until it's accepted. So it's usually a quarter delay. So I think we start to get revenue from that customer in March and June quarter.
Jay Deahna - J.P. Morgan
Bob, is that a full high current win for you? Was that like you were the sole supplier of the high current tools there at that point?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
I think we have a very strong position, I don't know that we are sole.
Jay Deahna - J.P. Morgan
Okay.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
And then it terms of? well, I'm doing them in reverse order here. In terms of Q1 uptick you are talking about the March quarter, Jay?
Jay Deahna - J.P. Morgan
Calendar yes.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
And let me give you a little color on that. We don’t give bookings but September was easily our worst bookings quarter of the year. And we are reasonably optimistic. Although we start to do it about the December quarter.
The other thing that was a little bit of anomaly about the September quarter which leads to the guidance we gave today is that typically we will get bookings which about half of them like turn into revenues the next quarter. The bookings we got in the September quarter predominantly were shipped in September, and there wasn’t much carry over benefit into the December quarter.
The second part of that is that the bookings that we expect in the December quarter have about typically, we get one third to one half for the next quarter, we are going to get a little over one third we think spill into the second quarter, which is the March quarter which gives us a little lift going into March.
So those things play out this way. Wanted to give you some insight. We didn’t get much lift from September bookings in to December but we will get some lift, we think from December bookings into March. So we are a little more optimistic as we get into the year. So I think there's a good possibility what you say is true.
Jay Deahna - J.P. Morgan
Just on that one, am I correct that the big JV in Taiwan is helpful there as well as well as your exposure to Korea?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes, those are both true.
Jay Deahna - J.P. Morgan
Okay.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Now if you remember, we said 85% memory in our mix of revenues in December quarter, and that’s a pick up from folks like that
Jay Deahna - J.P. Morgan
Okay. And then the other one was, what can you do in a flat CapEx environment.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Well, we gain share, flat CapEx, our revenues were up. How much up, we haven't go into share yet. And I think it ties to what CJ asked just a minute ago. We'll gain share in the next year, we'll gain share the year after and maybe a little bit more in ’09 than ’08 partially because of delays in getting stuff done in Japan in high energy. But it's going to happen.
Jay Deahna - J.P. Morgan
And if I could sneak one last one in. The stock is below 45 tomorrow, which seems pretty likely. Is this the level where you guys would go into maximum buyback mode?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
We will be buying back stock. I don’t know, we will have to look at it, what it says. We believe the stock? we are very optimistic about the company's outlook. If you look at our strategy, it feels real good. Our product position, competitive situation is great. We look at the quarter that’s okay, not so good for us, frankly. So do we jump into the stock tomorrow? I don’t know, we'd have to go through that with the board and the capital structure and we're blocked out for the next three days anyway.
Jay Deahna - J.P. Morgan
Okay thanks.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Thanks
Operator
Your next question comes from the line of Patrick Ho with Stifel, Nicolaus.
Please proceed.
Patrick J. Ho - Stifel, Nicolaus & Co.
Congrats guys on another good quarter, and congrats to your Red Sox as well. A couple of questions. Bob, first just on the financial side. Can you give me a cash flow from operations as well as what the stock options expensing was during the quarter?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes, the cash flow from operations was $25.1 million and expensing of options in the quarter was net of taxes $9.9 million and pretax was $19.6 million.
Patrick J. Ho - Stifel, Nicolaus & Co.
Okay. Great.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
That’s for the year. That’s for the year.
Patrick J. Ho - Stifel, Nicolaus & Co.
Okay.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
For the quarter it was $ 2 million after tax, $4 million pre tax.
Patrick J. Ho - Stifel, Nicolaus & Co.
That’s great. You kind of gave a little bit of color but could you tell, I guess in a little more detail what the customer sentiment is over past 30 or 45 days that’s changed a lot. Have they gotten more cautious? Have some you've mentioned both pull ins and push outs, there doesn’t seem to be any consistency, I guess among the markets. What are your customers telling you right now?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
I give a different answer every day. But I’ll try today. And Gary can pitch in too. I’ll talk to you just now Patrick. I don’t want to let anyone else know this. Kidding aside, this past quarter was a pain in the ass. I mean, we had customers pulling in, pushing out and we ended up the quarter, just ended, we actually beat our guidance a little bit. But I would characterize as foundry is basically pushed out and memory tactically we got acceptances. So we did okay. But I would say that, I would say there’s three people that I'll characterize, or four I’ll characterize. The foundries I think are a little conservative is spending in the immediate next quarter. The flash fundamentals are pretty sound and you see our memory spending is pretty good. I think DRAM pricing is tougher as you know. But they look to be spending. And logic is just, they are not taking any shipments this quarter. I think, we're okay, in logic. It’s just between the foundry slowdown and the immediate quarter and the logic guys just not taking shipments as big this quarter. So they combine for a not great December for us.
Patrick J. Ho - Stifel, Nicolaus & Co.
Okay. Great. And now a final question from my end. You mentioned some of the other application opportunities for PLAD, do you have kind of an estimated TAM in terms of dollars of what that might be worth in 2008? Some of these new opportunities excluding dual polygate?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes. I don’t think it's much in ’08. I think it’s a real possibility but it's not ’08.
Gary E. Dickerson - Chief Executive Officer
Yes. It takes time to drive adoption at some of those new applications. So they are very promising. Customers are doing demos and evaluations of some additional applications. But ’08 will mostly be the dual polygate for PLAD.
Patrick J. Ho - Stifel, Nicolaus & Co.
Great. Thanks a lot guys.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Thank you.
Operator
Your next question comes from the line of Stephen Chin with UBS. Please proceed.
Jagdish - UBS Equities
Hi, this is Jagdish on behalf of Stephen Chin. Hi Bob. Hi Gary. I had couple of questions. I just wanted to follow up on the first question is that, given the outlook by one of your foundry customers in terms of CapEx this morning, what do you see the outlook for foundry realistically spending in 2008? That’s my first question, please.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
I think whatever answer I give you, I will be wrong. Let me try. We're taking a conservative view in the December quarter, we talked about 8%, in fact we're forecasting zero tools for major foundry in the December quarter. Post December if you look at the historical experience in ’07 and learn from that, there was one big quarter on foundry spending in calendar ’07 and all the other quarters were sort of okay. And this quarter we're looking at is softish. So, looks like they guided down on CapEx for next year, and I don’t know, they know better than I do. So you can see we're taking a conservative stance in our December quarter. So they know better what they’re going to spend than I do.
Jagdish - UBS Equities
So, is it fair to say that your book to bill going forward in the first quarter of ’08 could be greater than one given--?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Yes. I do. Yes. I think our book? I hope and expect our book to bill in the December quarter will be north of one.
Jagdish - UBS Equities
No I mean the first quarter of ’08, I’m talking about like March.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Well we have got into that. What do I? let me see if I can keep myself out of trouble and still be helpful? Kind of early to tell, frankly, Jagdish. I don’t know yet.
Gary E. Dickerson - Chief Executive Officer
I think again, as Bob talked about this? certainly since I’ve been here there’s more churn in terms of customer shipments than in bookings, than I’ve seen. So you go through a number of these that’s different customers. For us right now trying to forecast Q1 of calendar ’08, if you do a bottom up assessment you can come to the conclusion that it might not look too bad. On the other hand, again there’s significant churn, so I think it’s difficult for us to give a good answer on that one.
Jagdish - UBS Equities
Okay. One other question. I just wanted to find out. What are the challenges in getting your customers adopted on the single wafer high energy against the batch tools? Do you see the same level of mindset share that you need to bring about for greater adoption or do you think there could be greater accelerated adoption given that people have already seen how your single wafer high current tools perform?
Gary E. Dickerson - Chief Executive Officer
I think that these things never go as fast as you would like. Typically when you introduce a new technology customers want to bring it into the fab, go through some type of evaluation period, obviously we try to accelerate that as much as we can. But I don’t see that having a big impact. And as Bob talked about this earlier over the next few quarters. Because again, it does take some time for customers to go through the evaluation. We think that the fundamental drivers are positive for the switch from older batch tools to single wafer high energy. We think that we’ll be in a very good products competitive position. But again, I don’t think it’s going to be something that’s going to happen over the next two or three quarters.
Jagdish - UBS Equities
Okay. Thank you.
Operator
[Operator Instructions].
And your next question comes from the line of Peter Kim with Deutsche Bank. Please proceed.
Peter Kim - Deutsche Bank
Hi, this is Peter Kim with Deutsche Bank. First, I would like to ask a question about you are in kind of a new territory here in terms of market share, nobody really has had this kind of market share dominance in the implant market for a long time, as far as I can see, in the past decade. And I am wondering considering that customers tend to place a pretty big focus on multi-sourcing, how do you feel about your market share gain, kind of competing with that customer need for multi-sourcing.
Gary E. Dickerson - Chief Executive Officer
Yes, I think you have to really look at every one of the markets and what are the drivers. So certainly in the last year, our market share gains were dramatic. And the main driver behind that was the architectural advantages we had with dual magnet ribbon beam technology versus single magnet spot beam technology. I think it’s also true that in very few markets you have a large supplier like Applied Materials exiting the business, and very few markets do have such a dramatic shift in terms of market share.
So again, I think that is very strong evidence that we have again a very strong architectural position versus the competition. And the other thing I think, again I mentioned this earlier, if you look at the customer behavior there are almost no customers that are splitting the business. So the ability to match again these fundamentally different types of technologies, the value and yield for lower particles that from a proven platform, proven technology, again those are all things that helped us in the dramatic market share gains that we've already achieved. And I think that puts us in a very, very strong position. My experience in the many different businesses is that if there is a close call between two products, customers, the second sourcing issue is a larger issue. But no customer is going to put themselves at a competitive disadvantage for cost and yield.
Peter Kim - -Deutsche Bank
And then if I could ask with regard to the PLAD, your new applications that you talked about in terms of modifying the resist and also modifying the etch rates, could you give us some color as to how many customers are actually looking at this with beta tools,[ and what do you think is the timeline for an adoption of either one of these technologies?
Gary E. Dickerson - Chief Executive Officer
So, one leading customer that is ahead of the rest of the industry in terms of technology, their technology position already has probably approximately 15% capacity on these types of implants in production. Now again, they are not? that is a leading adopter, that is not true of the majority of our customers. But as we have been discussing this with our customers in technical review meetings that we have on a regular basis, we are seeing a lot of interest especially in the resist stabilization type of implants for critical dimension, control and lineage roughness. So the pull from the customers is very strong for those new applications, but right now the adoption is pretty limited.
Peter Kim - Deutsche Bank
So you are shipping beta tools for evaluation of these new technologies?
Gary E. Dickerson - Chief Executive Officer
No, these are? these applications are applications of our current tools, they are?
Robert J. Halliday - Executive Vice President & Chief Financial Officer
New applications for the existing tools.
Gary E. Dickerson - Chief Executive Officer
Exactly.
Peter Kim - Deutsche Bank
I see. Okay, great, thank you.
Gary E. Dickerson - Chief Executive Officer
They are already in production again at one leading logic manufacturer.
Peter Kim - Deutsche Bank
Great, thank you.
Operator
At this time there are no further questions. I would now like to turn the call back over to Mr. Bob Halliday for closing remarks.
Robert J. Halliday - Executive Vice President & Chief Financial Officer
Sure. I want to thank all of my investors personally from Gary and myself for your great support the last few years. We have had a ? we haven’t had a great run, we anticipate continuing to have this run up [ph]. Our strategy feels good. I think we are going to gain market share and continue to grow our operating margin, share and grow our market we can address. So we look forward to interacting with all of you in the future. We are very confident we'll keep executing as per the plan. Thanks very much. Bye.
Operator
Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect, and have a good day
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