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Lam Research, KLA-Tencor deal raises some questions

Posted: 27 Oct 2015 ?? ?Print Version ?Bookmark and Share

Keywords:Lam Research? KLA-Tencor? acquisition? Moore's Law?

Lam Research's $10.6 billion acquisition plan of KLA-Tencor is met positively by analysts and is being considered as one of the good deals amid this year's flood of semiconductor mergers. However, some questions remain.

What do the companies' biggest customers think of the deal? I asked Intel and Micron. No comment. Silence can be ominous, or maybe just a sign meetings on the issue have not reached a conclusion.

The Applied Materials/Tokyo Electron deal reportedly was quashed because U.S. regulators were expected to deny approval. Letters from executives in big U.S. customer companies have significant influence in such calls.

A number of chip makers objected to the Applied deal because "they saw concentration of...etch and deposition" technology, said consultant Handel Jones, CEO of International Business Strategies (Los Gatos, Calif.). In the case of Lam/KLA "the overlap is very minimal, but it will give Lam more pricing power so there will be different objections," he said.

Jones is generally bullish on the deal, giving it a 65 per cent likelihood of passing regulators. If Intel and Micron give a thumbs up he ups the odds to 75 per cent in favour of passage.

I also got silence in reply to my question to Applied Materials about whether it would make a counter offer. But I thought I could hear the sounds of accountants tapping on calculators coming from the vicinity of Santa Clara, Calif.

"Applied should make an offer," said Jones. "The KLA board has to approve the best offer on the table, there's a lot of cash available and the cost of cash is low so it's often better to acquire technology then develop it yourself," he said.

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