(continued from previous post)
Regarding the IPEC 776 vs the Mirra for metals applications, I've demo'ed both, but do not have extensive experience with either. The 776 is definitely the cheaper solution from the standpoint of the initial capital cost and of the ongoing cost of ownership. The performance of both tools is adequate for W plugs. For the current generation of applications, I'd give the 776 the nod based on COO and throughput.
For copper applications, both platforms are flexible enough to accommodate any of the typical consumables' combinations being explored by mainstream copper process development engineers. For copper, issues such as uniformity, planarization, dishing, and erosion are more important than they are for tungsten. Both platforms are acceptable for some customers' needs, but I've heard anecdotal evidence (I've never run a head-to-head copper demo myself) that the Mirra performs a bit better than the 776 in these areas with a common consumables set based on the currently available released tool configurations. Both companies are working hard to improve these parameters (I won't talk about any specifics due to confidentiality commitments), and with future consumables developments, either tool will likely be able to meet the needs of even the most demanding customers.
My overall view of SpeedFam is still unchanged. It is the following:
1. Their technology is adequate to keep them in the game during the upcoming consolidation/downfall of the industry's weaker CMP tool makers. This should be all it takes to make a lot of money on this stock over the next few years as a 20-30% share of a growing market increases the revenue line dramatically, while fixed expenses and R&D comprise a smaller burden on a percentage basis.
2. The merger has been a big distraction that is severely hurting SpeedFam-IPEC's competitive position. No synergies from an R&D point of view have made it into a released tool upgrade that I'm aware of--for example, integration of IPEC endpoint into Auriga tools. (As to development activities, I don't know the details and couldn't share them if I did.)
3. Long-term, the merger should be a positive because it eliminates a competitor, joins R&D efforts to improve the next-generation offering of the combined company, and offers modest synergies in SG&A and field service and support.
4. The trick will be to see if SpeedFam-IPEC can get to the long-term benefits of the merger without the short-term distraction striking a fatal blow. I think that they'll be OK, but it is not a certainty. I'd rather see a lot more market penetration during this crucial time in the semi equipment cycle. Tool wins now translate into volume buys during the upcoming cycle of new fab construction announcements. Playing it right in the copper applications market will be crucial to success during the continuation of this upcycle.
5. They are still a potential take-over target, though I'd put the probability at only about 20% that they'll be acquired in the next year. NVLS remains the most likely candidate. (Though this percentage is low, it has kept me from writing covered calls against SFAM over the last several months.)
5. Overall, SFAM is a solid stock with a lot of poor execution already priced into the stock. They only have to execute modestly to exceed diminished expectations. With a price-to-sales ratio of about 1.5, it is undervalued relative to its historical multiples (peaks between 2.4 and 4.7 during recent years) and to its competitors. The revenue line should grow over the next several years as well, providing a 51% growth due to the multiple expansion on top of the revenue growth, which I'd estimate at about 40% (CY 2000 vs CY 1999). There are big error bars on those estimates and there are plenty of things to be worried about, but overall, I'm hopeful on SFAM's prospects from an investors' point of view.
Do your own research, and draw your own conclusions.
Profitable investing,
Mr. Sam
(For full disclosure, I continue to hold the same number of shares in SFAM that I've had since purchasing more in September 98 at 9 1/8. My average basis for all of the shares that I currently hold is about where the stock is trading now. My last two sells were a while ago in May 98 and Jan 97 at $20 and $31.25. SFAM represents 7.8% of my portfolio.) |
