Veeco acquiring Wyko, MRC unit

Electronic News, March 24, 1997 by Gale Bradley

Plainview, N.Y.--Veeco Instruments is working on the acquisitions of not one but two companies this week, having signed agreements to acquire certain assets of the Orangeburg, N.Y.-based Media & Magnetics Applications (MMA) division of Materials Research Corp. (MRC) and to acquire all of Wyko Corp. of Tucson, Ariz.

Veeco president and CEO Ed Braun tells Electronic News that the two purchases put Veeco on track to see in excess of $200 million in sales in 1998, more than double the roughly $90 million the company saw in 1996. "Analysts are sizing (the MRC division's potential) as $35 million in Veeco sales in '98 and they see Wyko at a potential of $45 million to our bottom line; these two combined are an $80 million extension of our business," he said.

"These really closely follow the strategy that we've been describing the last couple of years. We've been talking of the value we'll bring to our existing customer base. And in both of these cases, both MRC and Wyko, we can bring more technology and more product to the existing applications we sell to," Mr. Braun said. Veeco sells metrology tools to both the disk drive and semiconductor manufacturers, as well as disk drive fabrication tools.

The MMA division of MRC--a U.S. equipment subsidiary of Japanese electronics giant Sony--will be Veeco's for a purchase price including cash plus assumption of certain liabilities. Some MRC personnel are expected to join Veeco under the deal. The agreement is subject to execution of a definitive contract, approval of the boards of directors of both companies and certain third-party consents.

Why did MRC want to sell the MMA division? "What they have said, both Sony and MRC, is that they are really restructuring to be focused more on semiconductor applications," Mr. Braun said. "Sputtering for semiconductor materials is not part of (our purchase)."

"This is a sale of the product group that was focused on deposition for magnetics, an area we have seen terrific growth in," he said. "And the media and magnetics application group has developed a state-of-the-art MR/GMR deposition technology that we are going to bring out." The physical vapor deposition (PVD) equipment Veeco intends to bring out of the MRC group will be a successor to their Summit series PVD systems brought out at Diskcon two and a half years ago (EN, Oct. 10, 1994).

The new tools "existed in beta-site installations in the U.S. and Japan. We expect to be delivering commercial systems in the fourth quarter of 1997," Mr. Braun said. Veeco management believes the total available equipment market for thin film magnetic head deposition exceeds $100 million per year, it was said.

Veeco's broadened disk drive process and product capability will include ion beam etch (IBE), diamond-like carbon (DLC), secondary ion beam deposition (SIBD), ion assisted deposition (IAD) and PVD. The company's tools will now be able to address up to 23 etch and deposition process steps required in typical MR head fabrication.

The Wyko deal would bring Veeco Wyko's optical interferometric measurement systems for the data storage and semiconductor segments. The systems extend Veeco's current surface metrology product line to include automated, non-contact optical testing systems.

Veeco noted that in the hard-drive manufacturing process, the Wyko systems measure magnetic head shape and height, suspension arm height and angle and disk texture and flatness. Semiconductor manufacturers use Wyko equipment for measuring flip chips and wafer roughness.

The letter of intent provides that Wyko shareholders would receive 3 million shares of Veeco common stock in the acquisition, which is intended to be accounted for as a pooling of interests transaction. The consummation of the acquisition is subject to the customary conditions and approvals.

Mr. Braun said, "The combination of Wyko's non-contact, optical measurement products with the Veeco atomic force microscope, Dektak surface profiler and laser scatterometer will provide our hard drive and semiconductor customers with a complete range of measurement technologies for yield improvement and integrated test programs." Wyko, which is privately held, had unaudited revenues of $18 million and orders of $28 million for the 12 months ended Dec. 31, 1996. New products introduced in 1997 include an automatic inspection and test system for advanced microelectronic packaging applications which provides 3-D measurement of flip chip solder bumps of 150 microns and below, and up to 64,000 bumps on a single die. In addition, a new in-line laser inspection system precisely adjusts the static attitude of disk drive suspension arms and is ideal for next-generation miniaturized (pico size) automated thin film head fabrication, Veeco says.