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Technology Stocks : Speedfam [SFAM] Lovers Unite !
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To: Mr. Sam who wrote (3414)5/31/1999 10:18:00 PM
From: Justa Werkenstiff  Read Replies (1) of 3736
 
Mr. Sam Re: " I continue to believe that SpeedFam will be better off if it merges with a well-run company like Novellus. There may be a bit of a takeover premium that starts to get priced into the stock the next time such rumors circulate. The Obsidian buy is the latest sign that consolidation is accelerating. If the potential acquirers see SFAM's stock start to move up, it may accelerate their buy decision."

From a valuation viewpoint, I would like to know how much AMAT paid for Obsidian from a P/S and P/B perspective. Such information may be helpful in valuing SFAM as a takeover target. Unfortunately, such information is hard to come by at this point as Obsidian is a private company. I do know from my own research at this point that Obsidian was founded in 1997 and had 60 employees and was able to attract $16.2m in venture capital last year. I am uncertain if it had any sales to date but I suspect it has as the result of shipping some tools. So $137m seems like quite a premium for a start up like Obsidian. SFAM is trading at a P/S of 1.34 for FY 2000 (assuming FY 2000 revenues of 280m at $13 per share) and about $1.25 over current book. Time for the analysts to put the pencil to the paper on this one.

Re: "It's likely that SFAM got wind of the impending merger and made their press announcement as a response. I hope that they have thoroughly evaluated the technology and are not just responding with a "me-too" approach."

ML put out a piece last week stating that it believed SFAM made a bid for Obsidian for $100m. This offer was rejected and Obsidian is said to have gotten down to brass tacks with AMAT. This would make sense since Obsidian was saying publicly last year that it was looking to avoid AMAT's radar. And maybe AMAT wanted to get Obsidian before Semicon West so as to take the steam out of an Obsidian dog and pony show. It is also rumored (not from ML) that SFAM has a key ex-Obsidian, ex Strasbaugh employee working in the advanced technology group who understands web based steady state processing technology. Putting both of these items together and assuming they are both true, it seems to me that perhaps AMAT may have needed Obsidian more than SFAM. This speculation on my part. Moreover, SFAM has been in development of its web tool at least since November of last year based upon publicly available information.

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