Kent and Andrew
Glad to see I am prompting some dialog here.
Hey, I hope FSII does well. They just frustrate me with their lack of strategic action. Obviously they are a fine company that is multidimensional. So if they shoot themselves in the foot in one part of the business, they have other legs to stand on. They have a strong balance sheet and a lot of upside potential. And if the market gets strong, they could easily grow to $500 or $600 million rapidly. But they need the right products and the right distribution.
So now I am going to make some observations about distribution. My soapbox for the day.
I would personally like to see them make some significant investments in the European and Asian hemisphere in terms of direct distribution, demonstration facilities, finished assembly etc. This ownership position in Metron, their international distributor is rediculous. FSI has no direct control over their sales efforts, They probably have to give up a substantial discount to the distributor, and they can't make the strategic investments they need to make without the fear of angering their distribution partner. Their 1996 international sales were $108 million. If the distributor marks up the product by 50 percent, this would be a $50 million instant incremental addition to their sales if they were to go direct. And if they were in control of their distribution, they should be a lot more effective. Since the US market represents about only 25% of the world market, I would think that they could easily double their international business with the right strategic investments. Most of the other companies their size sell direct internationally. So I wish they would use their cash to either acquire their distributor and gain control, or spin that off and build their own infrastructure.
Now back to products. The advanced cleaning tools they build (reference Andrew's posts) are designed around the cluster principle. They use the Brooks automation wafer handler which is used by Lam, Novellus, CVC and others. The contamination challenges cited by Andrew can be best overcome by clustering the cleaning tools with with the etch or deposition tools. This means that their tools need to be mechanically and electrically compatable with the systems implemented by others. And ideally be sold as a companion to the processes sold by Lam etc. Or be sold by Lam etc. One of the trends in this business that is being strongly promoted by Applied and others (by the way, in a cluster concept, FSI's products will not interface easily with Applied's who owns 40 percent of the world's market) is that of process sequence integration. What this means is that the user, instead of purchasing a bunch of independent tools, is being sold an entire process. Ideally this would include cleaning as a integral facet on the cluster. FSI would be smart to be working with those guys that are promoting these processes to integrate FSI's cleaning modules on their tools. I don't know if they are, but if they are, it would sure be nice to see some press releases saying so.
This company has so much potential, It would sure be nice to see them making some positive strategic moves that continue to position them for the future. |
