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Rick Nelson CEOs address proposed Credence, LTX integration, June 25, 2008

Credence and LTX complement each other with respect to customers, product lines, facilities, and employees, say Lavi Lev, president and CEO of Credence, and David Tacelli, CEO and president of LTX. The executives outlined their reasons for the proposed merger in a conference call Monday (see “Credence, LTX plan merger, rationalization ahead”). In a follow-up interview, they reiterated some points, and although they could not talk about future roadmaps, they did provide some historical context that might suggest what the new company could look like.

As a prelude to their comments, Lev, who would become executive chairman of the combined company, said that the recent announced sale of Credence’s automotive ATE operations in Amerang, Germany (the old SZ Testsysteme), to Advantest was unrelated to the plans to merge with LTX. The Advantest deal, he said, “was a direct continuation of our logistical footprint reduction and had been planned for quite some time,” and the timing of the announcement was related solely to the complexities of closing a deal involving parties in the US, Germany, and Japan.

I asked specifically about overlap in product lines, as both companies are addressing mixed-signal and RF consumer semiconductor test. Lev commented on his past experience with mergers and acquisitions: “Normally you need to deal with significant overlap between companies, and things stall,” until product lines are rationalized. As for Credence and LTX, he said, “The overlap is obviously not nonexistent,” but he added, “One of the major reasons for this merger is to have very comprehensive coverage of the technical needs that are required for the consumer market.”

Lev said he could not speak about the product roadmap going forward, adding that it would be Tacelli’s role (as CEO and president of the new company) to present that information after the deal closes. Lev did say, however, that in the past he has seen little or no competition from LTX for business served by Credence’s ASL platforms. “On the ASL side it’s pretty clear that we are a very strong player.” Similarly, he said, Credence dominates LTX in high-end applications served by Credence Sapphire platforms.

He did say that the Credence Diamond and LTX X Series platforms have overlapping mixed-signal capabilities that will need to be sorted out. He added, though, that the Credence Amerang team performed the mixed-signal development for the company, and with the sale of the Amerang operation, Credence would not bring to the combined companies an engineering team that competes with LTX’s mixed-signal developers. He also suggested that X Series RF platforms may dominate their Diamond-family competitors—the Diamond 40 RF, he said, “is just starting its baby steps in the RF market.” Consequently, he said, the two companies’ “critical masses are distributed very nicely. There will always be something—that’s why we got the best ATE CEO around to figure it out.”

For his part, Tacelli commented on the lack of customer overlap. Credence, he said, has focused on penetration into fabless companies and is very strong in Asia, having provided the bulk of the 4000 platforms the two companies now field there. Meanwhile, LTX, he said, has focused on IDMs.

Tacelli reiterated his earlier comment during the Monday conference call that of 42 offices worldwide, the combined companies could close about 15 duplicate ones to contribute to the $25 million in annual savings the companies have predicted they can achieve. Lev said that fortuitously, in each of the 15 locations likely to see one facility closed, one or the other companies now has sufficient square footage to accommodate the other’s resources.

One concern that ATE customers typically voice is that they don’t want to pay multiple ATE suppliers to perform duplicate R&D—and proponents of the Semiconductor Test Consortium (STC) have advocated an industry standard that could result in sharing of costs related to “precompetitive” R&D. I asked whether Credence and LTX combined could realize R&D efficiencies. Tacelli would say only that “It’s safe to assume that we’ve looked at every element of our overhead, our structure, our cost relating to every function, R&D being one of them.”

I asked about whether the combined company would continue LTX’s recent support for some STC efforts (see “Thinking out of the box: Expanding STC’s impact with STIX”). Tacelli said that although he hasn’t supported the group’s original efforts to provide standardization within the tester, he does support the group’s recent efforts to standardize on common hardware and software external to the tester. Lev concurred, recalling his time in the EDA industry and his support for providing common interfaces into which customers could plug the IP of their choice. With standards, he said, “The customer needs to benefit—that’s priority number one.”

Posted by Rick Nelson on June 25, 2008 | Comments (0)

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