Ultratech (NASDAQ:UTEK) is a small company that seems poised to benefit from recent technology trends. The company makes equipment used in the fabrication of disk drive heads, integrated circuits, optical networking devices, laser diodes, and LEDs. One of its big products, a "stepper," plays a central role in manufacturing semiconductors.

Last Thursday, Ultratech reported sales of $28.8 million for Q2 2005, compared with $22.5 million a year ago. The net loss narrowed to $2 million ($0.08 per share) from $2.3 million ($0.10 per share) a year ago. True, earnings didn't improve much compared to the jump in revenue. Ultratech attributes this to the expenses of introducing new products: high research and development costs and increasing cost of goods sold as a percentage of revenue. The company is predicting earnings of $0.35 to $0.45 for the full year. Furthermore, the book-to-bill ratio, a widely used semiconductor-industry statistic, is a very healthy 1.5, indicating that business is improving.

The real excitement here involves a new system for a process called laser spike annealing, or LSA. Nearing final completion, these systems will be used to precisely and rapidly superheat specific portions of semiconductor chips during the manufacturing process. Ultratech's lasers perform this task much more effectively than lamp-based systems from competitors such as Applied Materials (NASDAQ:AMAT) and MattsonTechnology (NASDAQ:MTSN), and according to Ultratech's conference call, customers seem satisfied with current models of the system. The upcoming completion of LSA development should let the company reduce its research and development budget, helping earnings significantly.

Despite these good tidings, there are reasons for caution. Though Ultratech is still losing money, it has a relatively high price-to-sales ratio of 7.5. In comparison, FormFactor (NASDAQ:FORM), a Motley Fool Hidden Gems recommendation, has positive earnings and a price-to-sales ratio of 4.9. Further, LSA systems are being developed for 65-nanometer semiconductor line widths, a specification that is not yet in regular production. If semiconductor manufacturers decide to delay their investment in these smaller, denser chips, Ultratech's earnings will suffer, and competitors may gain time to develop similar systems.

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Fool contributor Dan Bloom doesn't own shares of any company mentioned in this column.