Like something out of a Bunuel film.......
(and I'm not talking about the image of Andrew trying UTEK puts):
ART Z LECTURES THE MOMENTUM INVESTORS (read: fund managers).
Fund managers tap their feet, look nervously at their watches, and gulp their lunch. Evidently the stock price hasn't yet crossed its 60-day inverted double helix dowsing cusp.
Well, I broke down and put on a tie. It was well worth it. A.Z. spoke to Denver money managers and private investors on Wednesday. I must concur with Andrew's descriptions, in various posts, of Art's energy and vision. It was a pleasure to be transported out of the stock market mindset, especially given the present psychosis in that neck of the woods. This talk was about BUSINESS: the semi equipment sector, UTEK's value to chipmakers, and the rather staggering fundamentals going forward. It was fun to see the investment crowd get a lecture - literally.
Art is fired up. One senses he's just beginning to really turn it on, full blast. Take a lesson from Spinal Tap: set your amplifiers on 11, folks. Chip production is expected to grow from $137B in 1996 to $331B in 2001. Fab equipment production will nearly double in that time frame. Capital spending will double as well.
UTEK is one of just five players in the lithographic imaging area - compared with 30 to 60 players in the etch and deposition process steps. With regard to cost savings for chip makers, it appears UTEK has a captive audience - the changing criteria for equipment selection are rather dramatic: In the 1960's & 70's, cost of ownership was not even considered by the mf's. At that stage of tech advancement, they were concerned with performance. During the 80's, cost of ownership became a 5 or 10% concern. In the 90's, 25-30%.
Ultrabeam - the result of UTEK's Lepton acquisition - will develop advanced electron-beam lithography for 0.25 and 0.18um masks. According to VLSI, this market will grow from $165M in 1997 to 406M in 2000. (For you Discovery Channel buffs, 0.18um is about twice the size of a large virus, & smaller than most bacteria.)
The shift from Inductive to MR heads in the drive industry is proceeding dramatically. From Art's graphs, MR production was about 1/5 of the total heads in 96. It'll be about 1/3 this year, and close to 1/2 in '98. UTEK has the equipment to make the transition. IMHO drive makers will be forced to compete. (All we heard from Wall Street this past week - as drive makers blew out estimates - was doom, doom, doom about competitive forces in the industry.) UTEK has closer to a 90% market share in head lithography, vs the often reported 80%. They deal with ALL the drive and head manufacturers except Yamaha. Evidently, the lion's share of revenues for the next couple qtrs will come from TFH.
Re the infamous semi book/bill issue, Art had graphs for each of the geographical regions - Americas, Europe, Asia-Pac, and Japan. For all areas, book-to-bill appears to have remained largely at or above 1.00 for a remarkable (IMO) four year period, '92-'95. Only in '96 did it drop below 1, and it did so simultaneously for all regions. The decline was steep, but to varying degrees of severity. In Europe and the Americas, orders dropped to levels not seen since 1994. Then, in late '96, the book/bill jumped above 1 for all regions at once. Art seems to be saying we're beginning a new march upward in growth. (During the 92-95 period of consistent book/bill above 1, the advance upward in sales looks relentless on the graphs.)
Art seems pretty damn excited about MEMS.
The P-Gild tool is impressing the mf's. There's no formal marketing yet, but, according to Laura Rebouche (IR), when they send the lead engineer out to explain it, he comes back with a one sentence report: "They want one." The first three demo units will ship next year, to Intel, HP, and Motorola.
Environmental concerns re the polyimide solvent are being addressed on a site-by-site basis. The systems are presently in use.
The shareholder rights plan was adopted as a matter of good practice. No intrigue implied. I got the impression they would entertain a buyout, but only at a fair price - which, after listening to Art, I'd guess would be steep. He seems very proud of what's been built. And very optimistic about the company's potential.
The business climate at present? Quotations are firming up, and the company is seeing few cancellations. One overhead reads: "Semi industry - at or close to bottom."
Apologies if the above seems to cross over into hype terrain. These are simply the main points that stuck with me following the talk. I'll try to confirm accuracy with IR this week.
AV - It's not the result of insomnia. I'm stirred up on this one. (Though I suppose I've put some folks to sleep in the process.)
Bill
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