Incorporated: 1991
NAIC: 333298 All Other Industrial Machinery Manufacturing
SIC: 3559 Special Industry Machinery Nec
Intevac, Inc., is a NASDAQ-listed company based in Santa Clara, California, comprised of subsidiaries split between two business units: Equipment and Imaging. The Equipment division produces sputtering equipment used by hard disk drive manufacturers to deposit thin films onto the magnetic disks to store digital data for computers and other electronic devices, including MP3 players, digital video recorders, and video-game consoles.
Intevac equipment is responsible for about 60 percent of the world's annual production of thin-film disks, serving such customers as Seagate Technology LLC, Hitachi Global Storage Technology, and Komag Inc. Intevac also manufactures sputtering systems to produce flat panel displays. Intevac's Imaging unit develops and manufactures extreme low-light-level cameras and military targeting equipment. Commercial markets include medical imaging, physical and life science research, pharmaceutical, petroleum, and machine vision.
In addition to its 180,000-square-foot Santa Clara headquarters and manufacturing facility, Intevac maintains imaging manufacturing plants in Fremont, California, and Laramie, Wyoming, as well as a manufacturing and customer support operation in Singapore. Intevac also maintains sales and customer support offices in the United States, Singapore, Malaysia, Korea, China, and Japan.
Company Founded: 1991
Intevac was founded in 1991 by Norman H. Pond. Born in 1938, Pond earned a degree in physics from the University of Missouri at Rolla, followed by a master's degree in physics from the University of California at Los Angeles while working as a project manager at Hughes Aircraft Company. He then went to work for GT&E Sylvania for a three-year stint before joining Teledyne Inc., a diversified electronics company where he held a number of posts, including group executive. In 1984 he joined Palo Alto, California-based Varian Associates Inc., which was involved in the manufacturer of semiconductor, communication, medical, and defense products. Pond served as president of the company's electron device group, and after four years he was named president and chief operating offices of the entire company. According to the Business Journal, Pond "left the company on less-than-friendly terms in January 1990. Back then, most of the financial community, along with Mr. Pond himself, felt he was heir apparent to Varian's chairmanship, then held by Thomas Sege. When the company settled on J. Tracy O'Rourke, Mr. Pond resigned."
A short time after taking the helm at Varian, O'Rourke decided to focus Varian efforts by selling off five business and eight product lines involved in chip making and defense electronics, two areas that were struggling. Well familiar with these operations, Pond sensed an opportunity. Despite difficult economic conditions at the time, he was able to use his connections in 1990 to raise funds from Kairer Aerospace and Electronics Corporation as well as venture capital from the investment firm of Dougery, Wilder & Howard. In February 1991 Pond formed Intevac and acquired three Varian divisions: Santa Clara-based Vacuum Systems Division, maker of disk-sputtering equipment, and Molecular Beam Epitaxy Equipment, maker of molecular-beam equipment for designing and producing advanced materials; and Palo Alto-based Electro Optical Sensors, which developed and manufactured night-vision goggles. After Pond cobbled together Intevac from Varian "leftovers," according to the Business Journal, "few people thought much of it. 'No one gave them a snowball's chance in hell,' said Mark Geenen, president of TrendFocus Inc., a market research firm in Palo Alto." Skepticism was understandable given the stiff competition Intevac faced, in particular giants in the disk drive equipment field: Ulvac, Japan Ltd., Leybold AG, and Anelva Corp.
Despite its doubters, Intevac wasted little time in becoming a profitable concern and paying off the debt taken on to acquired the Varian assets. A major help were contracts from the U.S. Army for night-vision gear that relied on gallium arsenide technology rather than standard electronics. Nevertheless, Pond elected to focus on disk-sputtering equipment and a new area, rapid thermal procession, used to produce flat panel displays. The molecular-beam unit was sold to Chorus Corp. for a 20 percent stake in Chorus in October 1992, and then in May 1995 the night-vision operation was sold to Litton Systems Inc. for about $7.5 million in cash. Later in 1995 Intevac sold its interest in Chorus for about $3 million.
Intevac's disk-sputtering unit was launched in 1982 by Varian to address limitations with the in-line disk-sputtering systems used by thin-film disk manufacturers to deposit magnetic media on disks. Information could then be recorded on the media. Instead, Varian took a similar approach to that used by single wafer processing machines used by semiconductor manufacturers, creating a single disk, multiple chamber static sputtering system, eliminating excess movement between the disk being coated and the sputtering source, thus providing greater control and disk uniformity. This static sputtering system that Intevac refined attracted the attention of disk manufacturers who began to purchase the new systems.
Aside from the disk-sputtering business, Intevac also elected to pursue the rapid thermal processing (RTP) business, entering the field in 1994 by acquiring assets from Aktis Corporation and some patents from Baccarat Electronics, Inc. RTP was a semiconductor manufacturing process that Intevac employed to create a system for the production of flat panel displays, the work conducted under the auspices of the U.S. military. Although Intevac had sold its night-vision business to Litton, it retained assets in the area of photocathodes, which were combined with the RTP business to create the company's Advanced Technology Division.
IPO Completed: 1995
Enjoying the benefits of increased disk drive sales to its disk-sputtering business, Intevac turned to the equity markets in 1995. An initial public offering (IPO) of stock managed by Robertson, Stephens & Company, L.P., and Hambrecht & Quist LLC was completed in November 1995, raising about $12 million. The company had higher hopes, however. Originally looking to sell 2.8 million shares at $8.50 each, an offering that could have fetched $25 million, Intevac had to settle for 2 million shares at $6 each.
The money raised from the IPO was earmarked for acquisitions and to finance growth. Less than two months later, in January 1992, Intevac paid $1 million in cash and $2 million in notes to acquire Cathode Technology Corporation (CTC), a company that developed sputter source technology for computer hard disk drive production, essentially sweeping the disk to create a uniform surface for sputtering and resulting in disks with increased performance. CTC technology was incorporated into Intevac's sputter system. Then, in May 1996, Intevac spent $3.7 million to acquired San Jose Technology Corporation, adding technology that followed disk sputtering, the lubrication of thin-film drives.
Intevac enjoyed a steady increase in revenues during the mid-1990s. Sales totaled $20.5 million in 1994, grew to $42.9 million in 1995, again doubled the following year to $88.2 million, and improved to $133.2 million in 1997. Net income during this period improved from $1.4 million in 1994 to $12.5 million in 1997. Disk-sputtering equipment was by far the company's largest business. As its technology became accepted, Intevac broadened the customer base and increased market share. At the same time the company looked to improve its position in the flat panel display equipment market, establishing a joint venture in Japan in 1997 that operated as a separate division. Intevac also continued to develop its proprietary technology in negative affinition photocathodes with backing from the U.S. military, making advances in the design of technology that could detect and identify military vehicles from long distances. Also, in late 1997 Intevac acquired RPC Technologies, Inc., a maker of electron beam processing equipment.
In the second half of 1997 the data storage industry entered a downturn that continued in 1998, brought about high inventory levels of disk drives and the adoption of just-in-time inventory practices by disk drive and computer manufacturers. More importantly the entire disk drive industry had made some serious miscalculations. While correct in projecting that the demand for storage capacity was going to experience strong growth, the industry failed to take into account changes in technology that resulted in higher capacity disk drives that were able to absorb this increased demand. Hence, the demand for the drives was actually flat and disk manufacturers, which had been ramping up production, suddenly stopped adding capacity and no longer needed new Intevac sputtering machines. As a result, Intevec's revenues decreased 28 percent to $96 million in 1998 while net income totaled only $400,000. Matters grew even worse in 1999 when revenues dropped a further 55 percent to just $43 million, leading to a net loss of $10 million. In response, Intevac cut its workforce in half and shut down its electron beam product line, closing the RPC Technologies operation in Hayward, California, in early 2000 and later selling some of its assets to Quemex Technology. Intevac did not abandon its disk drive business, which remained the core unit, and also continued to invest in its photonics business and flat panel display activities.
Difficult times continued for Intevac as it entered the new century. Sales continued to erode, dropping another 16 percent to $36 million, resulting in a net loss of $12 million in 2000. The year also brought a new CEO, Dr. Ajit Rode, but he lasted little more than a year at the helm, and in October 2001 Pond once again added the CEO responsibilities while continuing to serve as Intevac's chairman. Revenues picked up in 2001, due to newly developed flat panel display deposition and thermal processing equipment, as well as new photonics contracts. Nevertheless, the company suffered a net loss of $16.9 million in 2001, resulting in further cuts in head count.
New CEO: 2002
In early 2002 a new president and CEO was installed, Kevin Fairbairn, a 25-year industry veteran who had previously served as general manager of the Plasma Enhanced Chemical Vapor Deposition Business unit of Applied Materials Inc., and held a similar position with the Conductor Etch Organization, leading a group that topped $1 billion in sales. The new management team focused on the company's imaging technology while preparing to take advantage of an expected rebound in the demand for hard disk drive manufacturing equipment. In November 2002 Intevac completed the sale of its thermal processing equipment business to San Jose-based Photon Dynamics for $20 million plus the assumption of some liabilities. The money helped Intevac to make a significant reduction in debt, which in turn lowered the company's cost structure. The sale also resulted in Intevac reporting net earnings of $9 million in 2002 on revenues of $34 million.
Revenues improved slightly in 2003 to $36 million and the company posted a net loss of $12.2 million. However, the worst was over and having weathered the storm, Intevac was ready for better times, as evidenced by a significant increase in orders for sputtering equipment in late 2003. Moreover, Intevac introduced its next generation magnetic media sputtering system, Intevac 200 Lean, which began to gain significant market penetration in 2004. Intevac's revenues almost doubled to $70 million in 2004 and the net loss was reduced to $4.3 million. In addition, the company was able to raise $42 million from a secondary stock offering in 2004, helping the company to end the year with no debt and $50 million in cash and investments on the balance sheet. Intevac also positioned itself for further growth with the introduction in late 2004 of the Night Vista Camera, a day/night video camera that used the company's extreme low-light CMOS-based sensor. As a result of these advances, Intevac enjoyed a 97 percent increase in revenues to $137 million in 2005, leading to a return to profitability, the company recording earnings of $16 million. In order to bolster its business in Asia, the company opened a field office in Shenzhen in the People's Republic of China in late 2005 and made plans to launch an operation in Thailand in 2006 to provide further manufacturing and engineering services.
In 2006 sales increased another 89 percent to a record $260 million, resulting in record earnings of $46.7 million. Moreover, the company ended the year with an order backlog of $125 million, providing a springboard for even better results in 2007. Taking advantage of its regained prosperity, Intevac completed a pair of acquisitions in 2007. The company picked up DeltaNu LLC, a Wyoming developer of small spectroscopy instruments, and Carlsbad, California-based Creative Display Systems LLD, maker of high-performance micro-display products for both commercial and military use.
Principal Subsidiaries
Lotus Technologies, Inc.; IRPC, Inc.; DeltaNu Inc.; Intevac Asia Pte. Ltd.
Principal Competitors
Aviza Technologies, Inc.; ULVAC Inc.; OC Oerlikon Corporation AG.
Further Reading
Goldman, James, S., "Intevac Arises from Varian's Restructuring," Business Journal Serving San Jose & Silicon Valley, April 13, 1992, p. 1.
Hostetler, Michele, "Former Varian Executive Proves His Critics Wrong," Business Journal Serving San Jose & Silicon Valley, October 16, 1995, p. 1, 34.
"Intevac, Inc.," Spectroscopy, December 2005, p. 34.
"Intevac Names Kevin Fairbairn as New President and Chief Officer," Data Storage News, January 27, 2002.
— Ed Dinger
