STOCKREPORTS		 Silicon Valley Group, Inc. Nasdaq Symbol SVGI
19-JUL-97 Industry:
Equipment (Semiconductor)		 Summary: SVG is a leading manufacturer of automated wafer processing equipment for the semiconductor industry.

Recent Price 33.13
52 Wk Range 34.00 - 16.38		 Yield Nil
12-Mo. P/E 63.7

Quantitative Evaluation:
Outlook (1 Lowest - 5 Highest)
3-
Fair Value
34.80
Risk
HIGH
Earn/Div Rank
B-
Technical Evaluation:
BULLISH since 05/97
Rel. Strength Rank (1 Lowest - 99 Highest)
96
Insider Activity
Favorable

Overview 28-APR-97

We are forecasting a sales decline of 5% to 10% in FY 97 (Jun.), reflecting the current slowdown in capacity expansion within the semiconductor industry. The Thermco and Track divisions have been most severely impacted by the slowdown, while lithography (SVGL) revenues have held up fairly well. Revenues turned up sequentially in the second quarter, and this trend should continue in the remainder of the year, as the trough in the industry down-cycle has been reached. Margins will narrow, on lower capacity utilization and the company's commitment to increase R&D spending. Results will also be hurt by lower interest income, as SVGI anticipates being a net user of cash in FY 97. Including a non-recurring charge of $0.68 a share taken in the second quarter, the company will sustain a share loss for FY 97 of $0.08. Given a continued rebound in the industry and favorable market acceptance of SVGI's Micrascan III stepper, earnings could rebound to $1.60 in FY 98.

Valuation 28-APR-97

After a strong rally at the start of the year, the stock has retreated , as investors have become less sanguine about the amplitude of the recovery for the semiconductor capital equipment industry. Despite the decline in share price, we would not add to positions at this time. SVGI is not excessively valued, based on our FY 98 earnings estimate. However, this estimate makes a lot of assumptions about the health of the industry and the overall economy, as well as market acceptance for the company's Micrascan III stepper. We would like to see additional indications that these factors will be favorable for the company before recommending the shares. SVGI remains a decent holding, and the company's cash balance of nearly $9.00 a share offers downside protection.

Key Stock Statistics

S&P EPS Est. 1997 -0.08
P/E on S&P Est. 1997 NM
S&P EPS Est. 1998 1.60
Dividend Rate/Share Nil
Shs. outstg. (M) 30.8
Avg. daily vol. (M) 1.176
Tang. Bk. Value/Share 17.48
Beta 1.71
Shareholders 800
Market cap. (B) $ 1.0
Inst. holdings 54%
Value of $10,000 invested 5 years ago:$ 49,074

Fiscal Year Ending Sep. 30

Revenue (Million $)
1997 1996 1995 1994 1993 1992
Q1 123.7 158.3 85.97 70.92 54.14 43.70
Q2 140.7 170.7 109.4 85.30 51.60 48.20
Q3 NA 167.9 127.7 81.73 64.40 49.90
Q4 NA 143.1 139.0 81.98 70.50 50.70
Year NA 639.9 462.0 319.9 240.6 192.5

Earning Per Share ($)
1997 1996 1995 1994 1993 1992
Q1 0.11 0.54 0.25 0.15 0.03 -0.08
Q2 -0.54 0.58 0.33 0.23 0.01 0.01
Q3 E0.16 0.58 0.45 0.21 0.05 0.02
Q4 E0.19 0.38 0.52 0.24 0.13 0.02
Year E-0.08 2.07 1.57 0.84 0.22 -0.03

Dividend Data: SVG has not paid cash dividends on its common stock.

Business Summary 28-APR-97

Silicon Valley Group (SVG) makes and services semiconductor processing equipment used in the fabrication of integrated circuits.

Photolithography exposure products are manufactured through SVG Lithography Systems (SVGL). photoresist processing products through the Track division, and oxidation/diffusion and LPCVD (low pressure chemical vapor deposition) products through the Thermco division.

SVGL has two broad product families: Micrascan step-and scan systems, and the more mature Micralign scanning projection aligners. The company believes that its Micrascan system provides the greater resolution required for the next generation of complex, fine geometry integrated circuits through its use of a deep ultraviolet (Deep UV) light source, and overcomes the throughput and yield limitations of steppers by combining the elements of both steppers and scanners into Micrascan's "step and scan" technology. Step and scan combines the advantages of scanning projection aligners and steppers by scanning only a portion of the wafer, then stepping to another portion of the wafer and repeating the process as needed.

The company believes that its recently introduced Micrascan III stepper is the most technologically advanced product of its kind, but does not expect semiconductor manufacturers to purchase it in substantial volumes until late 1997.

SVG has entered into agreements with Intel Corp., Motorola Inc., Texas Instruments Inc., IBM and industry consortium Sematech, pursuant to which these semiconductor makers have made equity investments in the company. Sematech has also agreed to provide certain additional funding.

Track division products perform all steps necessary to process semiconductor wafers before and after photolithography exposure. These include wafer cleaning, adhesion promotion and photoresist coating which are completed prior to the photolithography step. Track's products also are used in steps required to treat wafers after photolithography exposure but prior to etching, including developing and baking.

Thermco division products address the oxidation/diffusion and LPCVD steps of the semiconductor fabrication process.

Important Developments

Mar. '97 The company purchased the 6% of SVG Lithography Systems it did not already own from IBM Corporation for $3,000,000. In a separate transaction, SVGI satisfied its full royalty payment obligation of $38,000,000 to IBM in exchange of $23,000,000 of SVGI's products, $10,000,000 of SVGI common stock and $5,000,000 of cash. A related charge of $0.68 a share was taken in the second quarter of FY 97 (Sep.).

Capitalization

Long Term Liabilities: $9,262,000 (3/97).

Per Share Data ($)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Tangible Bk. Val. 17.87 13.77 8.87 7.26 7.05 6.61 5.73 4.98 4.83 4.33
Cash Flow 2.50 1.95 1.27 0.82 0.49 0.73 0.92 1.14 0.65 0.44
Earnings 2.07 1.57 0.84 0.22 -0.03 0.12 0.42 0.94 0.45 0.32
Dividends Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Payout Ratio Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil
Prices - High 31 49 3/8 21 1/4 12 7/8 8 11 1/4 13 3/4 9 1/2 9 1/4 14 3/8
- Low 14 5/8 18 3/8 9 1/4 6 4 1/2 5 1/8 4 5 7/8 5 3/4 4 1/2
P/E Ratio - High 15 31 25 59 NM 94 33 10 21 45
- Low 7 12 11 27 NM 43 10 6 13 14

Income Statement Analysis (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Revs. 640 462 320 241 192 235 184 131 49.0 39.0
Oper. Inc. 99 61.9 34.5 16.4 9.3 12.7 13.7 17.5 6.9 4.8
Depr. 13.2 9.5 8.0 9.1 7.7 7.9 5.4 2.1 2.0 1.2
Int. Exp. 0.4 0.6 0.7 0.9 2.8 3.1 1.6 0.6 0.1 NA
Pretax Inc. 98.4 61.2 26.8 6.9 1.6 3.3 7.9 15.8 6.6 5.3
Eff. Tax Rate 35% 36% 38% 30% 70% NM 39% 39% 33% 41%
Net Inc. 63.0 39.0 16.8 4.5 -0.3 1.6 4.4 9.6 4.4 3.2

Balance Sheet & Other Fin. Data (Million $)
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
Cash 262 181 87.8 17.6 32.7 34.1 30.7 11.8 27.5 29.5
Curr. Assets 643 466 253 188 147 154 140 66.9 51.5 46.2
Total Assets 729 499 272 212 181 192 183 84.9 59.8 54.7
Curr. Liab. 179 142 80.2 77.9 53.6 69.4 79.9 22.7 8.9 8.9
LT Debt 0.2 0.6 1.5 2.3 1.6 8.2 26.5 Nil 0.2 0.5
Common Eqty. 542 350 168 110 104 104 70.2 60.6 49.5 44.3
Total Cap. 547 355 191 133 126 122 103 61.8 50.1 44.8
Cap. Exp. 3.8 21.4 2.7 0.7 3.0 5.7 7.9 1.8 1.7 0.6
Cash Flow 76.5 48.5 23.6 12.3 7.2 9.6 9.9 11.7 6.5 4.4

Curr. Ratio 3.6 3.3 3.2 2.4 2.7 2.2 1.8 2.9 5.8 5.2
% LT Debt of Cap. 0.1 0.2 0.8 1.8 1.3 6.7 25.7 Nil 0.3 1.2
% Net Inc.of Revs. 9.9 8.4 5.2 1.9 NM 0.7 2.4 7.3 9.1 8.0
% Ret. on Assets 10.3 10.1 6.2 2.3 NM 0.8 3.2 12.9 7.7 6.3
% Ret. on Equity 14.2 14.8 10.2 3.0 NM 1.7 6.6 17.0 9.4 7.4

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--101 Metro Dr., Suite 400, San Jose, CA 95110. Tel--(408) 441-6700. Website--http://www.svg.com Chrmn & CEO--P. S. Der Torossian. Secy--L. W. Sonsini. VP-Fin & CFO--R. G. Weinstock. Dirs--P. S. Der Torossian, W. A. Hightower, W. L. Martin, L. W. Sonsini, N. P. Suh. Transfer Agent & Registrar--Chase Mellon Shareholder Services, SF. Incorporated--in California in 1973; reincorporated in Delaware in 1987. Empl-- 3,072. S&P Analyst: Stephen T. Madonna, CFA


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