I apologize for the intrusion but a subscriber to my newsletter alerted me to your question and asked me to respond to your question. I will provide you are brief explanation that we presented in our newsletter on Thursday.
We have cut and pasted the comments we provided in RadarView on that day. Hopefully I have provided information that answers your question. If not, please feel free to contact me with further questions.
Andrew Vance
avance@radarview.com
RadarView Technology Newsletter
We had a running commentary on these stocks so you are seeing us pick up from prior daily commentaries. Even those readers that missed the first pop, were able to get in at $75 a day later. Some readers who were monitoring our universe of stocks, were able to see the handwriting on the wall and were able to get into ETEC at $48 - $45 on Wednesday.
Excerpts from Vol 4-009 01.13.00 Issue
AMAT ? opened slightly higher, declined at about 10:30 am, and then started to move up for the next hour and a half. We had Seller?s remorse from Tuesday and was looking for $115.25 as a 10% discounted re-entry but it never dipped that low. It remains to be seen what the merger effect will have on AMAT at the open today.
ETEC ? at close to noon, this stock took a quick pop up out of nowhere and volume was higher than normal. We missed the pop, saw no reason for the jump and watched it for most of the afternoon session. Just prior to 2:30, 100K shares hit the tables out of nowhere. This is significant for a stock that trades normally 300K shares a day. Bells and whistles went off and we pounced on the stock at $47.75 for a taste. Almost as soon as we did, we saw some large blocks hit the tape. We felt slightly better about the move and surmised something was up. In this case, both price movement and volume spikes, which we use as leading indicators, alerted us to some possible hanky-panky. Of course, a few hours later, it became very apparent that hanky-panky was exactly what had taken place. AMAT announced that they were taking over ETEC for close to $82 per share. ETEC closed at under $50 but was up to $75 in after market trading. In this particular case, an otherwise
boring set of screens helped alert us to this.
UTEK ? It?s been ages since we spoke of this company, and for good reason. The MEMS (micro-electromechanical) market they were going to sell into has not fully developed yet. The disk drive and Thin Film head sector has not been performing well and with the recent Bankruptcy filing by Applied Magnetics (APM), we wonder if there is any exposure for UTEK. The traditional 1X litho business is plugging along while the assembly applications for their equipment is coming along nicely. We have yet to see any real significant orders for their DUV stepper (courtesy of their acquisition of ISI, a privately held company) but we believe they will at least pick up some nice table scraps here, at worst. The most promising piece of equipment in their stable of products is a competitive system to the ETEC direct write mask-making tool. UTEK has a system installed at Photronics (PLAB), but more importantly is their EUV program and the possibility of taking this ?Ultrabeam? system and making it into a direct write wafer exposure tool. This will be the subject of many discussions this year. A direct-write system at the IC manufacturing level eliminates the need for reticles and eliminates cycle time and costs associated with conventional steppers and scanner. It also provides a much more cost effective and timely mechanism for prototyping new devices and designs, allowing multiple iterations to be written to each wafer.
The AMAT-ETEC merger raises the hairs on the back of our neck since the ETEC system is not a traditional IC manufacturing tool. AMAT will not be selling these systems to INTEL, MOT, TXN, TSMC, AMD, etc. but rather have more of a captive clientele in the form of PLAB and DPMI along their competitors or with captive mask makers at conventional IC companies. We are going to go out on a limb here but we believe that the ETEC acquisition is a long-term investment to fill in a very big hole in the AMAT portfolio. AMAT lacks a high end Lithography exposure tool. AMAT has products in all of the other major process areas and we know they have been looking for a decent lithography exposure tool supplier to rectify this situation. Personally, we see the ETEC acquisition as a stepping- stone to developing a direct write system for IC fab use. It is our belief that the ETEC technology and equipment are the perfect vehicles with which to accomplish this goal. Looking down the road, we see this as the next step in the lithography roadmap. This is further evidenced by the comments you will see in the announcement relative to satisfying programs with ASML and Lucent (the SCALPEL process). This would definitely bring AMAT and ASML one step closer to a marriage.
However, we must no count out Ultratech (UTEK) in this segment of the market. While there will be competition from Asian ion beam suppliers, UTEK does have a competitive product. This might turn out to be the last reasonable market that UTEK can compete in head to head and be a formidable competitor. For this reason, and the obvious implications down the road, UTEK has become an interesting prospect once again. As far as being a takeover candidate, we give it a reasonable but low probability, even though they would be a good addition to some of the AMAT competitors. As a viable alternative to the oppressive power of AMAT, and a more likely company to produce a higher throughput system at lower cost of ownership, we give UTEK a decent chance of succeeding. This is a very long-term prospect if we eliminate any merger mania from the equation. The only reason we mention this now is due to the attractive pricing, the AMAT?ETEC announcement, and the fact that UTEK is still declining. One never knows if they could get caught up in the ?guilt by association? fever if investors see UTEK as a ?me too? alternative to ETEC with hopes of a similar thing happening. |
