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Let’s face it, capitalism, the lifeblood of our economy, has long been the nemesis of successful implementation of green policies and their effectiveness in any given market. Its not that American companies don’t care about the environment per se, it is just that they care more about their bottom line, competitiveness and company growth. When faced with the prospect of adhering to new greener standards, many companies either fight the new standard or acquiesce more out of regard for their reputation than efficiency or philanthropy. Read the rest of this entry »

Legacy Systems Holding, Inc. (OTCBB: LGYH) provides wafer cleaning and stripping technology to the semiconductor and related industries. Under the direction of its President and CEO, Robert Matthews, Legacy has developed and patented a new, breakthrough process that employs “Green Chemistry” to produce an environmentally safe process for photoresist stripping and cleaning of any size silicon wafer. Legacy delivers its cleaning technology through its own state of the art benches that employ the latest in robotic systems, or via specially designed modules that can be integrated into existing bench technology provided by other equipment manufacturing companies.

Things just just seem to be getting worse and worse for the semiconductor industry. According to trade group SEMI, Q2 Worldwide semiconductor manufacturing equipment billings were down 26% from the first quarter of ‘08 and nearly 30% from Q2 ‘07. Moreover, the Philadelphia Stock Exchange Semiconductor Index (1-yr. chart below) hit its lowest point since 2004 on Monday and is down nearly 35% from last September.

‘08 Semicon Spending to Approach ‘05 Levels

The writing was on the wall by the end of 2007 as the overall industry failed to record double digit growth for the first time in its existence. For the record, the worldwide semiconductor space generated just under $274 Billion in revenues according to Gartner for a measly 3.8% increase over the prior year.

Looking forward, SEMI also stated this week that worldwide semiconductor equipment bookings were off 13% and 30% from Q1 ‘08 and Q2 ‘07 respectively. Commenting on the downtrend, SEMI’s senior director of industry research Dan Tracy recently commented: “Spending for new semiconductor equipment is down considerably as anticipated,”. “Overall 2008 spending will approach 2005 levels, with a recovery expected for next year.”

Legacy to the Rescue!

As I’ve mentioned in previous editions, an industry downturn, although troubling for manufacturers, presents a unique opportunity for companies boasting solutions that help improve margins. One company in our portfolio poised to do just that is Legacy Holding Inc. (OTCPK: LGYH).

For the record, Legacy is the only semiconductor-related company to ever win the prestigious U.S. EPA ‘Green Chemistry’ Award. In a rough and tumble economic environment the company’s technology demonstrates a significant value proposition for the $7 billion per year silicon wafer cleaning industry in 4- key ways:

1. Improving wafer processing time by 200%;
2. Enhancing oxide removal control by 92%;
3. Decreasing costs by 22% by reducing the amount of consumable materials used in wafer cleaning; and
4. Reducing particles left on the wafer after cleaning by 76%.

As equipment manufacturers strive to survive over the next 6-12 months while spending on their products dips, Legacy could in theory benefit from the overall industry downturn. The company has already proven itself to some extent through established relationships with Tyco, Micrel Systems, Silicon Genesis, the largest semiconductor equipment manufacturer and the largest solder bump deposition manufacturer worldwide.

In terms of generating business in a down market, Legacy’s CEO should be able to leverage his extensive rolodex of contacts into the development of new contracts.

CEO Has More Than 30 Years of Experience

If you’re not overly familiar with the company, at the risk of repeating myself for the upteenth time, Robert R. Matthews is a chemist with nearly 30 years of experience in the semiconductor industry with time spent as a process engineer at Texas Instruments (NYSE:TXN) and Intel Corp. (NASDAQ: INTC ). Mr. Matthews has also fostered deep ties with other leading semiconductor-related organizations including Applied Materials (NASDAQ: AMAT ).

What About the Stock?
After steadily losing value since around 7/30, the stock gained some steam on Tuesday, advancing more than 8% on nearly 25,000 shares traded. Who knows? Maybe the market has finally woken up and digested Legacy’s recent annual filing which exhibits a year-over-year revenue increase of 537% and net income of $101,846 in 2007.

Or maybe it was their recent quarterly filing. For the 3 months ended 6/30/08, Legacy logged net income of $92,618 on revenue of $222,334 vs. a net income of $48,809 on revenue of $182,778 in the corresponding quarter of ‘07.

The company also recorded a positive net income per share of $.01 vs. $.0 during the same period of ‘07. In regards to income from operations on a quarterly basis, LGYH made some significant improvements, decreasing operating expenses by nearly $40,000 and notching operating income of roughly $93,000 vs. about $35,00 in the corresponding quarter of ‘07. All in all, Legacy’s financial performance improved by just about every possible metric on both an annualized and quarterly basis. Something to take into heavy consideration when deciding whether or not to get into the stock’s next potential run.

Don’t forget, after nearly 4 months of losing value from March to June, LGYH rebounded back valiantly in late July before giving back nearly 100% over the past few months. I’ll be watching closely this morning to see if we are indeed about to witness yet another uptrend. Tuesday marked the first green close in more than 13 trading sessions, and we also saw some of the heaviest volume in the stock in quite some time, so, I strongly suggest putting Legacy on your radar screen this morning. Trust me, you’ll be glad that you did!

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Intel Corp and STMicroelectronics have joined forces to create a new company called Numonyx that will produce NOR, NAND and a new breed of flash microprocessors called phase change memory (PCM).

These types of memory chips are used in personal electronic devices from MP3 players to cell phones. Who better to clean these chips then our very own diamond in the ruff Legacy Holdings Inc. (OTCPK: LGYH).

LGYH already has ties to both companies making them a perfect choice for their patented green wafer cleaning technology the DryZone TM. Numonyx is scheduled to start shipping chips commercially later this year. LGYH could feel a positive impact from this joint venture as we head into Q2 of 2008.

Today, I saw something that put into perspective a trend that one cannot help but notice. In my neighborhood, we now have organic dry cleaning! We of course have organic grocery stores and restaurants but recently got organic paint and at long last organic dry cleaning.

The industrial age is (partly by choice and partly by necessity), taking a sharp turn in the way the simplest of products are manufactured – from that Versaci dinner jacket to the chip that go into your PC. Companies as large as Intel understand this growing industry standard of going green – hence their connection with today’s player in the rising green trend.

Buck the Trend with Legacy

As fears that the U.S. is entering a period of stagflation continue to rise, Legacy Holding Inc. (OTCPK: LGYH) is showing the characteristics of a fractious stock unwilling to succumb to the pressures of a weakening economy. Shares are up about 100% since our last update back on February 8th and the market seems to be warming up nicely to one of our favorite companies for ‘08.

Trading Commentary

Over the past ten trading days, LGYH stock has more than doubled in price on volume of about 125,000 shares (see accompanying chart). During this upward surge, the stock pulled back on just two of these days trading into an easy to spot up trending channel.

The one dollar mark as well as recent highs of $1.10 and $1.43 look to be easily reached near term targets.

Industry-Leading Solutions Coupled With Highly Esteemed Executives

When coupling industry-leading solutions with a battle- tested industry executive team the way that LGYH has, the chances for success are quite promising. Founded by four Texas Instruments engineers back in 1989, Legacy has developed and patented a new, breakthrough process that employs “Green Chemistry“; to produce an environmentally safe process for cleaning silicon wafers simultaneously improving efficiency.

Now providing both modular and complete solutions, LGYH has already developed business relationships with the likes of Tyco, Micrel Systems, and Silicon Genesis, the largest semiconductor equipment manufacturer and the largest solder bump deposition manufacturer worldwide.

The company’s President and CEO Robert R. Matthews is a chemist with nearly 30 years of experience in the semiconductor industry with time spent as a process engineer at Texas Instruments and Intel Corp. He’s also fostered deep ties with other leading semiconductor- related organizations including Applied Materials.

Industry Snapshot

The semiconductor world is largely dominated by five leading players with Intel leading the way and commanding about four-fifths of the PC microprocessor market. They are followed by Applied Materials, by far the world’s largest maker of the complex components used in the production of semiconductors.

STMicroelectronics and Texas Instruments are the two largest analog chip makers with Taiwan Semiconductor Manufacturing Company known as the largest producer of chips. TSM has revolutionized the chip manufacturing process, which has afforded companies that lack production facilities to outsource the production of their chips.

With little room for new competition, these companies are constantly developing new chips and production processes in order to stay competitive and ensure that their respective market shares do not diminish. This makes the market for LGYH’s solution virtually inexhaustible.

Significant Value-Proposition in the Semiconductor World

Legacy’s technology demonstrates a significant value proposition for the $7 billion per year silicon wafer cleaning industry in 4-industry key ways:

Improving wafer processing time by 200%;
enhancing oxide removal control by 92%;
decreasing costs by 22% by reducing the amount of consumable materials used in wafer cleaning; and
reducing particles left on the wafer after cleaning by 76%.

At present, LGYH’s unique technology enables it to compete in a market space of approximately $5.5 Billion in annual sales or 13.5% of the $41B wafer equipment market. LGYH has also identified a secondary market for its technology in the packaging solder bump process, which is projected to increase to approximately $142 million by 2009.

The company appears to just be scratching the surface of a multi-billion dollar market. And by the way it has traded over the last couple of weeks; it appears that the market is willing to pay increasingly more for the potential here.

With proven, patented products already placed with leading semiconductor players and a highly regarded CEO with extensive industry contacts at the helm, we’re excited about the company’s future. We’ll be tracking it closely so check back soon for updated coverage on Legacy Holdings Inc.