Ultratech, Inc. (NASDAQ:UTEK)

CAPS Rating: 2 out of 5

The Company develops, manufactures and markets photolithography and laser processing equipment designed to reduce the cost of ownership for manufacturers of integrated circuits.


Player Avatar NetscribeTech (< 20) Submitted: 1/12/2007 1:04:56 AM : Outperform Start Price: $12.29 UTEK Score: -6.69

The major impediment Ultratech, Inc (UTEK) suffers from is operating in niche markets that are susceptible to entry by firms with much greater scale and resources. Otherwise, Ultratech envisages an upside potential, with hefty cash and sound financial position to weather the downturns of the chip equipment industry.

UTEK primarily manufactures and markets photolithography and laser thermal processing equipment for manufacturers of integrated circuits and nanotechnology components. With operations spread across all over, Ultratech now holds more than 80% share in the advanced packaging lithography industry and is strategically moving away from its traditional business as a supplier of photolithography tools.

Advanced packaging is an emerging area and offers enough opportunities to cherish in the electronics market. Endorsing the same, Ultratech has concentrated its business in two niche markets, advanced packaging lithography and laser processing, which are expected to grow at a rate of over 25% over the next several years. Likewise, as the trend toward faster and smaller electronic devices continues, UTEK is likely to garner the maximum.

With 12 years of research expenses on its laser-processing tool, Ultratech has built up a strong patent portfolio for its product, giving it an edge over its competitors. Going forward, the company believes that its laser-processing product will be the major growth engine, thereby boosting its revenues by double-digit growth rate in 2007. With improved manufacturing and installation efficiencies, supported by aggressive cost-cutting measures, profit margins of the company are likely to see an increase in the coming years.

As advanced packaging market is in infant stage, UTEK is strategically focusing on the same. With international operations contributing significantly to its top-line, the increased demand from emerging economies portrays a positive operating environment for the company, going ahead.

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