Suprised no one has piped in about Brooks farming out their site support to AMAT. I no longer have stock in BRKS but still follow out of sentimental reasons. Used to work for Equipe, then PRI then Brooks after the buy out. Any way, here is what I think about it.
AMAT makes a fortune in service contracts. With the cyclical nature of this industry and the reduction in new fab starts vs the past, I see service revenue as being one of the key elements for a tool company to stay profitable in the long term. Brooks' loss of that revenue seems to be very short sighted.
"The numbers you are quoting are (I assume) from their recent report?"
"I do know that when sales were in the toilet, both when PRI and Brooks, that the only place that was making any money was support."
Show me your data that the AHMS service organization was making money 1 year ago, and that service was the "only" place that was making money.
"I didn't see anything in the release about who would be handling spares."
"announced a collaborative program with Applied Materials (Nasdaq: AMAT - News) that leverages Applied Materials' global service infrastructure and capabilities to deliver world class support and spare parts management"
Hey, like I said I'm humble. It didn't make sense to me that they sold support. The numbers you are quoting are (I assume) from their recent report? When they are having record sales?
I do know that when sales were in the toilet, both when PRI and Brooks, that the only place that was making any money was support.
This did include spares. I didn't see anything in the release about who would be handling spares.
I challenge your to read the press release.
They negotiated an agreement with AMAT to suport some stuff in the old PRI factory automation product line.
Factory automation is the smallest piece of thier bussines. If you doubt me, read the SEC filings, or listen to CC.
In the last 2 quarters ending March: (From their SEC filings)
Equipment automation $78M up from $53
Software $38M up from $21
Factory Automation $21M up from $18
(of which the PRI stuff is but one part)
For anyone out there that "realy knows" service, it is spare parts which gernerate 80% of the revenue and profits not labor.
"IMHO the sale of service to AMAT was good for AMAT but what did Brooks get out of it?"
IHMO it is better to partner with your largest potential OEM customer, and take some profits on spares, than keep a bunch of people, in a bunch of FABS, in a bunch of countries, to support a bunch of obsolete products, in a market where you are at best #4.
I'm sure that when sales are up, that software pulls in a significant amount of revenue. The idea here is that when times are bad, service is one of the few places you can rely on to draw revenue. And at the time was the highest revenue earner.
The original intent of the post was that IMHO the sale of service to AMAT was good for AMAT but what did Brooks get out of it?
Why would a firm sell their most profitable cash cow to a competitor (not my choice of terms - but JB's - at Amat)?
There is more to this picture than meets the eye.
Or maybe BT just needed to float his boat this quarter to cash in on some options that are expiring.