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Player Avatar TMFPlatoish (97.74) Submitted: 10/15/2006 4:56:03 PM : Outperform Start Price: $12.77 BRKS Score: -72.12

I'm taking a chance that it is safe to get back in the water. I picked Brooks Automation in CAPS some months ago and decided to bail with a 14% gain when the SEC turned up the heat on options backdating and NASDAQ threatened delisting. They have since restated their results and are now current with the SEC. The results weren't pretty and the had to write down $50M+ in expenses going back to their IPO in 1996. They stated that 99% of the issues were prior to 2003, when the new management team took the reins. The fat lady hasn't finished on this yet because it is unknown what the DOJ/SEC is going to do about this widespread abuse in punitive terms, and the IRS also hasn't set precedent. Brooks also recently settled a patent case regarding their factory automation products. Things haven't been pretty here, but if the last two quarters are indicative of what we can expect going forward, the clean-up is mostly complete and a turnaround is in place. This company is fundamentally undervalued and I think a 50% upside is possible over the next year or so. Brooks sells wafer transport, wafer handling, and vacuum subsystems components into the large semi equipment vendors for incorporation into the large processing systems. They also sell software to the large semi manufacturers for plant management and tracking wafers through the manufacturing process. Two recent acquisitions look like they can potentially increase their product base and they look to be on a $1.00+ EPS run rate. I've listened to David Nierenberg say this is the most undervalued company in his concentrated small cap portfolio. I tend to agree with him if the company can clean up its execution and put most of this nonsense behind them. I think the new management team is on the right track. Outperform from here.

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