Brian, well that's not good news. Here is an interseting story on KLIC. Apparently, AMAT is hurting them on the back end and reading between the lines I wouldn't rule out an AMAT purchase of KLIC.
Hmm, now that would be interesting. Jeff
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Kulicke & Soffa CEO Says 2 Acquisitions Fell Through Last Month
Kulicke & Soffa CEO Says 2 Acquisitions Fell Through Last Month
New York, March 1 (Bloomberg) -- Kulicke & Soffa Industries Inc., the No. 1 maker of tools used to assemble semiconductors, said it tried and failed in the past three weeks to buy two companies that would have expanded its product line.
The money-losing equipment maker also held talks with six other companies last year, none of which panned out, Chairman and Chief Executive C. Scott Kulicke said in an interview. He declined to name the companies.
Kulicke & Soffa is concerned that changes in semiconductor design could make its tools unnecessary, and wants to branch into chip testing by acquiring new technology and products. CEO Kulicke said that if he can't find partners or ventures to broaden the business, he wouldn't rule out selling his company. ''Our world is changing,'' Kulicke said. ''It seems increasingly clear that conventional assembly won't support the needs of the industry.''
The two companies Kulicke & Soffa failed to buy last month would have cost at least $100 million apiece. One was asking too much, while the other decided after 15 months of talks that it didn't want to be acquired, Kulicke said.
Applied Model
Kulicke & Soffa, based in the Philadelphia suburb of Willow Grove, Pennsylvania, makes wire bonders, tools used to install tiny gold wires that complete the circuit between a chip and the device it powers. Its main customers are Intel Corp., the world's No. 1 chipmaker, and Korea's Anam Semiconductor Inc.
Assembly is the last of three phases in the so-called back end of the semiconductor industry. Packaging, which protects the chip, and testing, which checks its performance, are the other two. Kulicke predicts that assembly, packaging and test eventually will be combined in a single process in the drive to reduce costs.
That would make the back end more like the front end, where Applied Materials Inc., with the broadest line of equipment, is leading a movement to integrate the processes that go into making a semiconductor.
Applied, the biggest maker of chip equipment, has benefited from supplying most of the machines needed to make a chip, unlike smaller rivals such as Novellus Systems Inc. and Lam Research Corp. Applied stock has gained 61 percent in the past year, while Lam rose 10 percent and Novellus gained 32 percent.
Kulicke & Soffa rose 1/2 to 25 7/8 in late trading. The stock has gained 46 percent this year. ''The industry needs someone in the back end with the clout, the breadth of products and the depth of technological resources that Applied has,'' Kulicke said.
Applied doesn't make any test, packaging or assembly tools.
Lacking Expertise
Kulicke & Soffa is expanding into packaging, via its Flip Chip joint venture with Delco Electronics Corp. Still, it lacks the expertise to quickly develop chip-testing equipment on its own, Kulicke said. Other companies that build testing gear include Teradyne Inc. and Credence Systems Corp., as well as units of Hewlett-Packard Co. and Schlumberger Ltd.
Should his overtures fail to yield a test partner, Kulicke, whose father cofounded Kulicke & Soffa in 1951, said he will consider selling the company or merging it.
His top choices would be Teradyne, the biggest maker of testing gear with $1.49 billion in 1998 sales, or Credence, a smaller rival with $216.8 million in sales last year. Kulicke & Soffa had revenue of $411 million in fiscal 1998, which ended in September.
Kulicke said he isn't discussing a sale or merger with either company. He also doesn't want to buy or merge with a company in Japan, since the business culture there is too different.
Teradyne President and CEO George Chamillard said his company is focused on internal development and isn't looking to merge with or acquire any other company. Dennis Wolf, chief financial officer at Credence, said he agrees that consolidation in the back end of chip equipment is likely at some point. ''He's on the right track,'' Wolf said of Kulicke's plans. ''But right now, we don't see consolidation.''
Kulicke said any company he buys will be acquired with stock. While his company has $100 million in cash, he doesn't want to have to write down the goodwill from a cash acquisition, which can depress earnings.
Kulicke & Soffa had a loss of $8.86 million, or 38 cents a share, in its fiscal first quarter ended Dec. 31. That compares with net income of $6.82 million, or 29 cents, a year earlier.
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