The majority of the software product range had been accumulated during more than ten years of acquisition activity by Brooks, normally buying much smaller companies than itself. The list is long and some had competed directly with each other creating a certain level of overlap, especially in fab MES.

When Brooks finally created the software division, rumours began circulating that it would only be a matter of time before the division was sold off. Not surprisingly, the company associated with such a purchase was Applied Materials!

Of course every company wanting to find an exit strategy would like AMAT to come in and put them out of their misery, but there was always a level of logic in this kind of marriage.

That was a while ago and nothing subsequently materialized. However, I had noticed that Brooks executives had said virtually nothing about Brooks Software at its annual financial analyst conference and the presentation material did not highlight any tangible business plan for the division other than the typical upward motion of revenue potential chart lines!

With so much merger and acquisition activity this year, I didn't doubt that Brooks Software was up for grabs. Brooks had made it clear in regular quarterly conference calls that its core business going forward was the automation hardware and big OEM customers. Software was expendable, which came down to timing issues.

I would be surprised to hear after the smoke rises that AMAT and Brooks have not been in discussions for some time and may have been in start/stop mode for several years!

Why now?

Not sure about the AMAT timing aspect, though AMAT has been busy buying other companies this year and so the window may simply have opened. The Brooks timing, on the surface, does point to the need to replace a significant amount of $cash, should it end up repaying bond holders to the tune of $175 million as a default clause kicked in over failing to be able to comply with SEC rules over quarterly filings due to its stock option grant problems.

The fact that AMAT paid cash to the tune of $125 may not be a coincidence.

Even if we don't yet know what was behind the AMAT timing, there are some obvious synergies for AMAT in relation to MES and other scheduling and tool support areas. It was no surprise that AMAT's service division picks up another feather in its cap, but there are concerns about what AMAT has actually purchased, what will it do with it and will it make money at it?

The impression I get from the fab field - and one that has been fairly consistent for several years - is that there is a lot of sorting out for AMAT to do, and some surprises are no doubt lurking.

On a general point I would expect Brooks' software customers to heave a big sigh of relief if that helps you understand better my last comment. How much of the division AMAT will retain is a moot point at this early phase, but some level of streamlining is sure to unfold, though I doubt much will be made public.

What I would expect and knowing a fair few of the customers, AMAT would be wise to continue the factory simulation conference as this was deemed an important part of that acquired company's business and would also assist AMAT in taking its business model higher up the fab planning ladder and could further differentiate itself from its competitors. The expertise and product portfolio in the simulation group could also assist AMAT in helping improve the production efficiencies of solar cell manufacturers, for example.

Overall I think there is some hard work ahead for AMAT in getting some good ROI on this purchase, but there should be some happy fab people out there all the same.