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TheStreet Open House

FEI Is Looking Large in Nanotech

Whenever the hype surrounding a new technology reaches a certain pitch, someone dusts off the historical nugget that most of the loot from the California gold rush went to those who made and sold the tools. It's happening again as nanomania builds, with makers of electron microscopes finding their wares in increasing demand.

Never mind that some of the "toolmakers" of the Internet boom of recent years, notably the fiber optics companies, are still recovering from the subsequent bust. There's reason to think that companies such as FEI (FEIC) are already among the earliest beneficiaries in the race to harvest products from the fledgling field of nanoscience.

Last year, $8.6 billion was invested in nanotechnology research and development, according to Lux Research, a flow that's growing by about 10% a year. Unlike dot-coms, however, nanotech firms are seeing only a sliver coming from venture capital firms, which remain cautious about the technology. Some $4.6 billion came from government sources, such as the National Science Foundation, and $3.8 came from companies that see nanotechnology expanding their current businesses -- from DuPont's (DD) fabrics to General Electric's (GE) myriad initiatives.

Hillsboro, Ore.-based FEI competes with giants such as Hitachi (HIT) and smaller rivals such as Veeco Instruments (VECO) (which tried unsuccessfully to buy FEI in 2003) in producing equipment for analyzing and manipulating matter at the atomic scale. Thanks in part to a powerful new microscope, FEI's stock has fared better than Veeco. So far this year, FEI is down 1%, while Veeco is down 29% amid a perceived slowdown in orders from chipmakers.

FEI may be a small company, but it thinks big: Earlier this month, it unleashed a scanning/transmission electron microscope called the Titan 80-300, the first microscope that can create an image of a particle one angstrom large. (An angstrom is a tenth of a nanometer, or about one-250,000,000th of an inch.) With that resolution, Titan can produce images of carbon atoms.

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