ASM International Keeps It Together

Dutch chip-equipment vendor ASM International(ASMI Quote) will not split its operations, despite the continuing drag on financials posed by half of the company's business.

Investors bid down shares of ASMI nearly 3% Friday, after the company's announcement the day before that it has terminated a review of its operations conducted by Lehman Brothers. That review was designed to explore "whether changes in the current business model may be required at this stage with a view to shareholder value creation."

ASMI, which posted $860 million in revenue last year, sells semiconductor fabrication tools to dozens of chipmakers, including Intel(INTC Quote), Advanced Micro Devices(AMD Quote), Samsung and Texas Instruments(TXN Quote).

ASMI's revenue is split roughly in half between two distinct businesses: so-called "front end" wafer fabrication equipment and "back end" chip assembly and packaging tools. But the front-end business, in which new products require large investments to develop and can take years before providing a return on investment, has been unprofitable for the past five years, stunting the company's growth.

ASMI has previously said the front-end business will turn a profit in 2007, and believes the company benefits from important synergies by playing in the two businesses.

Following a review by Lehman Brothers in the past few months, ASMI's management has concluded that "presently any material changes in the company's business model could be seriously detrimental to achieving the company's aims of restoring the profitability of its front-end operations."

Further commissioning of an external review of the existing business model is not in the interest of the company or of its shareholders at this time, ASMI said. The company said it will reconsider an external review of its business model at a future date, once consistent front-end profitability has been achieved.

Shares of ASMI were off 2.7%, or 49 cents, at $17.55 in midday trading Friday.