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Rare quarterly profits raise questions about FSI, other midsize companies |
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Oct 23, 2006 at 10:53 AM |
Don Mitchell and his crew at FSI International had reason to celebrate last week, when the company announced a 4Q06 profit as part of its fiscal 2006 year-end financials.
Unfortunately, the yearly numbers didn't tip into the black, as the company posted yet another annual loss.
I checked back through fiscal 2001 and found that FSI has had five profitable quarters out of 24 and only one profitable year (2004) out of six during that span. FSI is not the only midsize semiconductor equipment supplier with such a checkered financial record. But they offer a good example of the difficulties faced by companies that are not only trying to compete successfully in the global market, but survive. And FSI's market--the surface cleaning/conditioning/treatment/etc. space--may be one of the most challenging, with a long list of players like Applied Materials, Dainippon Screen, TEL, Novellus, SEZ, Semitool, Axcelis, Mattson, Ulvac, and Akrion fighting over a few billion dollars in business.
FSI's technology and products are as good--or in certain applications, better (as its growing list of "tool of record" wins suggests)--than its competitors. The company has benefitted from the ascent of flash memory as a chipmaking market driver since some of its systems fare especially well in NAND process lines. Don and his team run a relatively tight financial ship, and the outlook is good for the near term since they expect to hit profit again in 1Q07. (btw, if FSI does stay in the black next quarter, it will be the first time since 3Q and 4Q04 that it has done so in consecutive quarters.)
Yet I wonder how much longer small to midsize semiconductor tool and subsystems outfits like FSI (let alone materials companies, which have their own set of concerns) can continue to operate as independent entities, given the daunting challenges they face in maintaining consistent profitability.
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