January 16, 2007 – Thales Fund Management, claiming to be the largest shareholder in San Jose, CA-based photolithography toolmaker Ultratech Inc., is seeking a sale of the company, saying growth prospects can be better monetized as part of a larger organization.

The hedge fund, which claims to have an 11% stake in Ultratech, cited repeated reductions in financial guidance and an increased ultraconservatism about the company’s business forecasts. The fund pointed to a Feb. 2006 public conference call with chairman/CEO Arthur Zafiropoulo, who stated that “the biggest problem that we have in our company is not our technology but our size. […] And so that may provide [customers with] a risk factor. If we were a larger company, maybe we would be getting the successes faster.”

“Both advanced packaging and laser spike annealing have significant growth prospects, and if the current underperformance continues into 2007 we will have to conclude that these opportunities can be better monetized as part of a larger organization,” Thales stated, in a letter to the company’s management which it made public this week. “To that end, we hope that the board as well as senior management will be open-minded and proactive in contemplating a sale of the company as a way to maximize shareholder value.”

Ultratech shares have been battered for much of the past year, with share pricing slashed by more than half since April to about $12 in December. On Dec. 21, UTEK cut its 4Q guidance, doubling its previous loss-per-share guidance to $0.25-40.30 with a 25%-30% sequential dropoff in revenues due to delivery pushouts, and pledged to chop 10% of its workforce and close some locations.

Reuters notes that Thales is a New York-based hedge fund group with about $1.5 billion in assets, according to SEC filings.