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Nov. 17, 2003 — FEI Co. makes charged particle beam systems — tools that help customers observe, analyze and manipulate materials at the submicron level. It’s a perfect place to be as small tech enters the business world.
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FEI’s products serve in R&D departments and production facilities in the semiconductor and data storage industry, and at universities and research labs.
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“The focused ion beam is like an atomic sandblaster,” explained Jay Lindquist, senior vice president of corporate marketing and strategic development. “It can cleanly remove material from a surface.”
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The most common use for the FIB is as a tool to cut a cross section into a wafer to view all of its layers. “That is useful for prototyping a new circuit design,” he said.
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“We can test and fix and retest without having to fabricate it all over again.”
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The beam can also repair of defects on photomasks or rewire an integrated circuit by cutting a wire or depositing wire in or on the integrated circuit.
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Applications for FIB products include gathering and supplying information about materials, while DualBeam products combine two different types of beams to perform cutting and imaging functions.
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FEI first opened its doors in McMinnville, Ore., in 1971. Founded by Linfield College researchers, FEI made high-purity, single-crystal materials for field emission research and use in transmission electron microscopes, hence the company’s original name, Field Emission Inc. Later, the company moved to Hillsboro, Ore., to be closer to customers Intel Corp., Hewlett-Packard and Seagate Technology LLC.
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Several economic downturns and a few mergers later, company payroll continues to grow. “The cool thing about FEI and our technology is that it becomes more valuable for our customers as features get smaller, so demand for our tools remains relatively stable,” Lindquist said.
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Financially, FEI is hard to read, as fluctuating ratings from investment analysts show. Two investment advisers changed their ratings on FEI twice in one month.
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One of them had to do with confusion over a failed merger with Veeco Instruments in January.
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“What we were doing was focused on our belief that the merger with Veeco would fall apart. It was our estimate of the stock price on a near-time basis,” said D.A. Davidson and Co. research analyst Matt Petkun about his company’s Jan. 7 downgrade of FEI. Davidson upgraded the stock to “buy” on Jan. 29.
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“Immediately after the deal fell apart the price went down, because of the arbitrage spread, not as a market response,” Petkun said. He said he believes the companies should have merged, since both Veeco and FEI sell products to the same customer set.
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“The nanotech part of the business is growing, the semiconductor part is stable, so the industry will see mergers,” Petkun said.
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He likes FEI’s new CLM 3-D DualBeam system, which he called a significant tool in the semiconductor manufacturing process. Offering enhanced software controls for an automated system, the data-gathering system can get FEI into the fab portion of the semiconductor market.
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Needham & Co. of New York has maintained a “buy” rating since April 2002. In an Oct. 24, 2003 research note, Needham analyst Cristina Osmena maintained her “buy” rating while raising her price target to $26, citing “multiple challenges in the near term” including unfavorable currency exchange rates, a change in manufacturing sites and pricing pressure.
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Company file: FEI Co.
(last updated Nov. 17, 2003)
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Company
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Ticker
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Headquarters
5350 NE Dawson Creek Dr.
Hillsboro, Ore., 97124
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History
Founded in 1971, FEI shipped its first product in 1982 and went public in 1995. Philips Electronics owns 25 percent of the company. Key 2003 events included a near-merger with Veeco that fell apart early in the year, acquisition of Revise Inc. and a $6 million July purchase of EGSoft.
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Industry
Optical testing and analysis systems for integrated circuit manufacturing
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Employees
1,655 worldwide; 330 at company headquarters
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Small tech-related products and services
FEI manufactures and distributes scanning electron microscopes and focused ion beam systems that aid in assessment and analysis of 3-D structures down to the atomic level.
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Management
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Investment history
In early 1988, FEI received $300,000 in seed-round funding from Northwest Technology Ventures’ Oregon Resource & Technology Development Corp. Fund. The company held a $23.8 million IPO in June 1995.
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Revenues
Sales for the first three quarters of 2003 equaled $263.2 million; total sales for 2002 were $341.4 million, with $8.7 million net income. FEI has posted a profit each year since 2000.
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Selected strategic partners and customers
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Selected competitors
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Barriers to market
FEI must battle against an overall economic slowdown, increasing competition in the sector and market pricing pressure. Since FEI does not set up long-term customer contracts, and pulls most of its revenue from a small customer group, a customer’s move to a competitor could be very detrimental to FEI’s bottom line.
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Why they’re in small tech
“We’re in nanotech because that’s where our tools add the most value,” says company spokesman Jay Lindquist. “We’ve been pulled into it by our customers, who say ‘I need your capabilities to deliver tools that can help me deal with these things.'”
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What keeps them up at night
“The biggest thing we struggle with is, ‘Did we choose the right applications and the right markets to go after?’ The indication to me that we did is when our customers tell us to do something. That tells us they value us.”
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Relevant patents
Apparatus and method for reducing differential sputter rates
Carbon nanotube probe tip grown on a small probe
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Recent articles
Nano tool market is no small change
FEI makes microelectronic acquisitions
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Contact
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— Research by Gretchen McNeely