| To: Duker who wrote () | 3/16/1999 8:48:00 AM | | From: spiny norman | | | |
Duker -
1) any guesses as to the indicated first trade/initial market cap and how liquid this thing will be? Since this is OTC and VAR was NYSE, how many MMs know or really care?
2) What's the best way to play - buy VAR and hold the pieces,
or be a vulture and hope that some people want no part of the semi-equip piece?
3) If you want to spread the word, maybe post on the GGNS thread. Some of VSEA was purchased from GGNS for about 30MM last year.
regards,
spiny |
| | Varian Semiconductor Equipment Associates -- VSEA | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (2) |
|
| To: spiny norman who wrote (1) | 3/16/1999 9:37:00 AM | | From: Duker | | | |
I have got to have a long conversation with a guy who is much more up to date on the health care piece ... it is truly up in the air what people will be willing to pay for this piece?
I am still in the process of trying to determine if and when this thing will trade "when issued." Typically, the market is most inefficient when this happens ... people start blowing out the piece that they do not understand in what is typically a very thin market. I am going to call over to the IR person today to get the scoop on it. Its record date (I think) is the 24th (so it may be when issued sometime thereafter until the payable date which is April 2nd ... I am not ever sure what the mechanics of these things are ... but, I will check into it).
As far as the "sum of the parts" versus the "vulture" strategies ... The guy who has done the work on the other two businesses believes that the Semi piece could be worth nothing and it [i.e., VAR] was still a great buy anywhere in the low thirties. This gives me some hope that even bright people with big stakes in VAR will be willing to jettison the Ion Implant business ... so, I would want to get greedy and play the role of the vulture on this one.
You are going to have about 30mm shares outstanding. $100mm in C&E and no debt (small payable).
The operating model is not very different from most of the SemiCaps. The gross margin in 1997 on a big slip in revenues was 43% ... but that was sweetened by about $30mm of royalty income from their relationship with TEL. That numbers was less than $10mm in 1998 and will be still lower this year.
But, as business picks up, you can expect a 40%+ Gross Margin and probably 20%'s in the OPM department ... with upside depending on the strength in the recovery ...
The company will have about $3.33 in cash and $6.35 in book when it comes out of the womb.
I have no idea where the valuation is going to be ... but I would be willing to pay a multiple of those two numbers <g> ... though I would rather pay $3.34!
I appreciate your interest and your suggestion on GGNS.
[OT ... got the CFMT 10Q yesterday ... will go through it this morning ...]
-- Duker |
| | Varian Semiconductor Equipment Associates -- VSEA | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (1) |
|
| To: spiny norman who wrote (1) | 3/25/1999 5:51:00 AM | | From: Duker | | | |
Wow.
What a crazy first day of trading.
The temporary ticker is VSEAV (on a when-issued basis).
The low was $8!!! It closed at $12 3/4. That is real money.
I tried to buy some at $11, but the volume was very thin and my executions had to go through a special desk ... so, I held off.
I wonder how much traded at $8?
I am hoping that this thing will trade down when it goes "right way" on or about April 2.
--Duker |
| | Varian Semiconductor Equipment Associates -- VSEA | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last Read |
|
| To: Duker who wrote (2) | 3/25/1999 6:00:00 AM | | From: Duker | | | |
Can Varian make it as a 'one-trick pony' in the ion-implant equipment business?
Semiconductor Business News, © 1999, CMP Media Inc.
March 15, 1999
By Will Wade
PALO ALTO, Calif. -- To some observers, what Richard Aurelio is about to do sounds pretty risky to say the least. He's going to launch a semiconductor equipment company with just one product line.
-Varian's Aurelio
Actually, his company already is a going concern that's currently the No.2 supplier of ion implant systems worldwide. Now top man at Varian Associates Inc.'s semiconductor equipment division, Aurelio takes over on April 5 as CEO of Varian Semiconductor Equipment Associates Inc., when Varian splits into three separate companies. The breakup may sound perilous, but the 54-year-old Aurelio is excited about building a business around one technology instead of operating as just one unit of a larger, diversified company. To succeed on its own, his new company "doesn't really have to do anything different from what we're already doing," he maintains. "We just need to be unfettered to be able to do it."
Splitting out his division is the best move, Aurelio is quick to point out, because there is no longer any technological glue to provide synergy between the different Varian units, and it will allow each of them to do what it does best. "We will be focused only on the semiconductor equipment business," he adds. "We won't be distracted by the other business units."
Varian currently has a hodgepodge of product lines. Besides turning out chip-making gear, it competes in the medical equipment market with X-ray systems and radiation oncology products for cancer treatment and in the precision instrumentation market with traditional analytical and nuclear magnetic instrument lines. Under the reorganization, the semiconductor equipment and health care operations will become independent companies, while the parent company is left with only the instrumentation line.
Breaking out Varian Semiconductor Equipment as an independent company makes sense to some industry observers. Dan Hutcheson, president of VLSI Research Inc., is one. "It's hard to be in the equipment business and [also] be in something else, because this industry takes 100% of your attention," maintains the San Jose-based market researcher.
"The old theory was that being part of a conglomerate would allow an equipment company to weather the down cycles," he notes. "But the problem is that most conglomerates don't have the wherewithal to support a cyclical business. In the good times it gets milked for profits and in the bad times they don't invest in a money-losing venture," Hutcheson says. "Eventually," he adds, "the division looks like an anorexic patient slumped over." The new Varian chip gear maker definitely is a 'one-trick pony,' but for now Aurelio wants to keep it that way. He has no problem in putting all of his eggs into the implant basket, adding that lithography is another market where an equipment maker can successfully be a one-product company.
The reason, according to Aurelio, is that both lithography and ion-implant are rather isolated steps in the chip manufacturing process that don't depend on the supplier building products for other phases of chip-making. Veteran market watcher Hutcheson agrees with him.
The main advantage in splitting up Varian is to obtain a higher price for the stock, Aurelio says. He complains that Varian stock is currently highly undervalued. "Our shares should trade at prices close to our peer groups in the industry, which are [relatively] much higher than ours is today," he says. A higher priced stock, of course, would give Varian Semiconductor Equipment additional capital by using its common shares to pay off debt, buy another company, or fund more R&D.
For now though, Aurelio's primary goal is to get his operation back into the black by the end of this year. The division reported operating losses of $14.7 million in its fourth fiscal quarter and $6.7 million in its first quarter, which closed at the end of December. In fiscal 1998, the division reported a 20% decline in sales to $338 million.
Once Aurelio gets the new company back in the black, he wants to ensure that it has enough cash on hand to fund his R&D and capital expansion for the next market upturn. This has been a continuing problem. As a division of Varian, the semiconductor equipment vendor produced $400 million in profits during the last chip gear upturn, but only got to keep $100 million, he says. The other $300 million was spread throughout Varian.
"We want to control our own destiny, and our own cash," Aurelio lashes out.
One new product that Aurelio needs money for is designed to handle the next-generation of silicon wafers. To process the larger 300-mm disks, Varian switched technology. Its current 200-mm systems place several wafers on a spinning disk and process them all at once. The new system processes one wafer at a time at the same throughput. But there's less waste material and dust kicked up, providing more precise processing. The new system also is smaller, so it requires less space in the fab. It also can be used to process 200-mm wafers as well. The new system is ready to go, he says.
Later on, Aurelio says that he'd consider buying another ion-implant system maker, such as Applied Materials Inc.'s ion-implant line, or one of his smaller Japanese competitors. Such acquisitions seem unlikely, however. Aurelio also says he'd consider buying a manufacturer to jump into another market, but only one where he wouldn't have to compete against a company with multiple, synergistic offerings such as Applied.
Varian Associates is one of the grand old ladies of Silicon Valley. It first entered the scene in 1948 by being the first company to deliver klystron tubes to power radar systems. Aurelio describes the company historically as being more focused on research than on marketing, a shortcoming that led the company down many technological paths.
"We got into things that interested us, but they were only somewhat related," he notes. "And we didn't always do a great job of commercializing the research into products." Varian also didn't always have the money to commercialize some of these efforts, he adds, because the company was spread too thin.
Varian first entered the semiconductor equipment market three decades ago, and at one time or another has had a major presence in the etch, physical vapor deposition, sputtering, e-beam lithography, and ion-implant markets. "In its heyday, back in the 1980s, Varian was one of the top ten equipment companies," VLSI Research's Hutcheson points out.
But faced with weak marketing support and increasing competition from such newcomers as Applied Materials, Varian gradually pared back its equipment offerings. After Novellus Systems Inc. acquired its physical-vapor-deposition unit for $150 million in 1997, its ion implant business was the only chip gear line remaining. Last July, Varian strengthened its position in this market by acquiring Genus Inc.'s ion implant product line for $25 million.
Today, Varian is ranked No. 2 in ion implant gear by VLSI Research with a 30% market share. Market leader is Eaton Corp. with a 40% share, according to the market researcher. Applied lags behind in third place with 10% of this market.
Hutcheson projects the total market for ion implant systems will reach $700 million this year, up slightly from $685 million in 1998, but down from a peak of $1.2 billion in 1996. Because this technology is now fairly stable, ion implant gear is a pure capacity buy. As a result, this market has suffered in recent years from the global chip-making capacity glut.
Aurelio is hopeful that sales will increase during the next few years, but the recent upturn in semiconductor sales has not had much direct impact yet on his market. "We won't see an upturn here until somebody starts to break ground on a new fab," he adds.
While Varian always has been headquartered in Silicon Valley, its ion implant systems business has been located in Gloucester, Mass. So Aurelio is moving his new company headquarters back there later in March.
"We're ready to go back home," he says. "We want to shorten the chain of command and put everybody under one roof."
|
| | Varian Semiconductor Equipment Associates -- VSEA | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (1) |
|
| To: Duker who wrote (9) | 4/16/1999 1:58:00 PM | | From: Duker | | | |
Got a solid slug today at $9 3/4.
I think it pays to be a bit more aggressive here. At this rate, I will run low on cash in the next few days ... I may play the "valuation arb" a bit in a little bit ... sell some AMAT (though I would rather do so in the mid-to-high $60's. I have a nice pile of 20% taxable gains from which to draw.
Lonely thread.
--Duker |
| | Varian Semiconductor Equipment Associates -- VSEA | Stock Discussion ForumsShare | RecommendKeepReplyMark as Last ReadRead Replies (2) |
|
| |
