FEI Company At NASDAQ OMX 27th Investor Program - Transcript

FEI Company ( FEIC)

NASDAQ OMX 27th Investor Program

December 7, 2011 09:15 AM ET


Ray Link - Executive Vice President & Chief Financial Officer


Ray Link

Okay, thank you very much. Before I start, I would like to just point out that everything we say is covered by our Safe Harbor Statements and I encourage you to take a look at our SEC filings, to take a look at the risks and uncertainties involved in any investment in FEI.

So quickly, who is FEI and what do we do? FEI is a scientific instrument company. We make tools for nanoscale imaging, based on electron microscopy as our primary technology. The products that we produce fall into three general areas. Transmission Electron Microscopes, which are very high end, very expensive, very high resolution. These are tools, where we can see, the individual spaces between atoms used for a variety of applications, from material science, life science, semi-conductor laboratories, and other fields. Our price range on these products is generally from about 700,000, all the way up to $7 million, with an average price of about 1.5 million. We are the market leaders, both in resolution and in revenue, in this particular product line.

Our DualBeam products combine, both an electron microscope and a focused ion beam, where the focused ion beam is used to do very high precision milling, so you can thin samples also look at the underside of samples, and flip them using a variety of applications, material science and its semi-conductors in particular.

And lastly, our Scanning Electron Microscopes, which are for the everyday electron microscope, which sell on average for about $400,000. In terms of marketing position, we are in number one, in both, Transmission Electron Microscopes and in DualBeams, which is a product that we actually invented.

We have many different applications for our products, both geographically and markets. And I’d like to just show you a couple of different pictures. This is President, Barrack Obama. He visited Intel, main designed fab, located just next to our facility, in Oregon. He was there about for about 2 hours, he had a nice speech and he spent about another 30 minutes, looking at their particular products underneath our microscope, we were pretty proud about that.

Another application in material science, this is Prof. Daniel Shechtman, who was recently awarded the Nobel Prize in Chemistry, for discovering quasicrystals, which was more a bit theoretical exercise, 15 to 20 years ago, when he first came up with the discovery, but he couldn’t prove them out, until he actually purchased an FEI Titan Microscope, which he credited, with one of the reasons for him winning the Nobel Prize. We were very happy and pleased with his discovery.

Another application, this is a helicopter delivering one of our electron microscopes, which is loaded with very sophisticated software, to an actual well sided Papua New Guinea. So people are actually using our tools at WellSites to analyze our core samplings, as a process called mud logging or surface logging, very exciting new business opportunity for the company. And lastly, here is a picture of the Shanghai Protein Science facility, where they pursued over a high end Titan Krios microscopes, are for life science applications.

So as a company, we’ve been working on building our end markets, trying to expand our global reach, and try to take this core technology, that historically had been used, primarily by professors at colleges and universities, and in semi-conductor manufacturing, few other areas. The areas in particular we’re looking at are life science applications and natural resources.

When we look at the company, we’re fairly well spread out, both end market in terms of revenue and by geography. Roughly, a third of our business is in what we call, research and industry. And research and industry includes both, the classic colleges and universities and national labs. It’s really a global business. We’re getting tremendous growth out of China, out of India, out of Brazil. Eastern Europe in the Middle East are off sending any weaknesses we’re seeing in the U.S. and in Europe.

Other pieces included in the research and industry, do include the natural resources, which is a new business for us. It’s more than double in revenue this year, it’s a very profitable segment for the company in terms of the gross profit margin. Largely because, it’s a low end tool loaded with very sophisticated software. We also sell to Industrial Corporations that are buying tools for their primary research labs to improve their products and processes, by a planned nanotechnology to do that.

Another piece of our business, that’s roughly a third of revenue is in the semi-conductor space. We call it electronics because it is both, semi-conductor and data storage. The vast portion of that revenue is in the semi-conductor lab space, where tools are used to help design next generation integrated circuits.

We have a small percent of our revenue in Data Storage which is an inline tool. I’ll talk a little bit more about that in a moment. Life sciences which is a little over 11% of our revenue, is also a relatively new market for FEI. It’s now $100 million revenue opportunity for the company. This year, we have really pioneered the use of using electron microscopes, for biological research, where traditionally people are using high end digital light microscopes, where they were limited by resolution. Now moving it into an electron microscope, they can do 3D imaging and get much more data and analysis and look at things at a much higher level or resolution.

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