INDUSTRY NEWS Industry greets KLA-Tencor merger with insouciance

Did the recently announced merger of KLA Instruments and Tencor Instruments—creating a one-stop shop for yield management products and services—have an air of, perhaps, inevitability about it? When you mention that notion to Kenneth Levy, KLA's chairman and CEO, he pauses for a second and chuckles before replying. "It was a very good idea. But sometimes very good ideas are not inevitable. It made a lot of sense when we were talking to our customers about it. The customers all agreed that this is in their best interest." Industry analyst Dan Hutcheson, president of VLSI Research, dryly terms the merger "intuitively obvious." He recalls receiving a phone call minutes after the alliance was announced on January 14. "When I was first told about the whole deal my response was, 'Oh, OK.' The caller asked, 'That's all you have to say?' My reply was, 'Yeah, what more do you say? It's not a surprise. Especially with the Applied situation.'" Applied Materials made a splash in December when it entered the metrology and inspection market with the purchase of two Israel-based companies, Opal and Orbot Instruments. Orbot's products for wafer-defect and reticle inspection directly target both KLA and Tencor, and Opal's CD-SEM system competes with KLA product. Jon Tompkins, Tencor's chairman, president, and CEO, points out: "We had started our merger discussions prior to the Applied announcement. Clearly, though, the announcement didn't slow our process." KLA and Tencor, of course, tried to hook up four years ago. So what made the deal, which is valued at $1.3 billion, attractive this time? "When we got into protracted due diligence four years ago it was pretty obvious there was a difference in culture between the two companies," acknowledges Tompkins, who will become