Ultratech, Inc. (UTEK)

This is part of a tech run up that lost site of valuations.
UTEK has two products. Advanced Packaging Lithography and Laser Spike Anneal. Most outperform picks likely look at LSA as the growth side and packaging as vunerable to competition. But I don't think that is the case.

Laser Spike Anneal is a promising technology, but the major semiconductor manufacturers are likely worried about buying critical technology from such a small company, and other larger competitors will likely fill this niche with flash anneal or rapid themal processing before it takes off for UTEK. I think their best bet would be to spin this off and sell it to a Novellus or AMAT. A larger company would find this more valuable.

The Packaging segment is really low end lithography. The obvious competition would be from high end litho vendors like Nikon or ASML. But adapting the high end technology to the lost cost and relatively low volume market segment where UTEK plays is harder than it seems. At best they could sell a few tools and lower their overall margins in the process, at worst, they could invest in the segment and find out its harder than they anticipated and get no return at all.

Packaging is the growth segment for UTEK, but management doesn't realize it. The big semiconductor manafacturers are 5-7 years away from 450 mm wafers, the cost reduction from the wafer size doesn't effect die level tasks like packaging and test, once they notice this, they will start investing in these two segments and UTEK will be well placed to benifit. I suspect someone like AMAT will realize this and buy them when the price is right, and it isn't right today.

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