The semiconductor equipment biz is dominated by a few large companies -- Applied Materials
Sales contracted over the past year, to $27.3 million from $35 million. Despite the decline, gross margins actually improved a little bit to 39.4%, from 39%. Unfortunately, the bottom line dropped into the red, with the net loss totaling $3.2 million ($0.14 per share), compared with a $1.6 million profit ($0.07 per share) last year. I'm not too concerned about the decline in sales, because Ultratech sells a small number of expensive systems -- losing or gaining just one sale can make a significant difference in its apparent rate of growth.
My primary attraction to this stock continues to be the company's laser spike annealing (LSA) technology. The technology involves very quickly heating a wafer to impart certain characteristics in the transistors that form the individual semiconductor chips, resulting in reduced leakage of current from the chips. The basis for my optimism is that solving the leakage problem at advanced process geometries, like the current state-of-the-art 65 nanometers, and the upcoming 45-nanometer generation, is difficult. Unfortunately, it has taken Ultratech longer than I had hoped to convince the semiconductor makers that its system can help. Management believes it has worked the kinks out, so we will have to see what develops over the next year.
While its efforts so far have been focused on logic companies -- for example, Intel
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