February 13, 2015
Dear Fellow Stockholders of Axcelis Technologies:
As we prepare for the 2015 Annual Meeting in May, we want to inform you of the
nine Board nominees that the Company will be nominating for election this year
and update you on the significant actions the Axcelis Board and management
team have taken to best position the Company for the future.
AXCELIS HAS TAKEN BOLD ACTION TO CREATE STOCKHOLDER VALUE
Your Board and management at Axcelis are executing on a well-defined strategic
plan designed to create sustainable, long-term stockholder value. Since 2011,
the Company has:
o Developed and introduced the full Purion product offering, which is
enabling us to gain share and establish a leadership position in the ion
implantation market;
o Significantly reduced operating expenses in demonstrating our focus on
cost discipline;
o Improved capital allocation and strengthened our balance sheet to drive
stockholder returns;
o Enhanced our management team by adding four new executives to the top six
positions at the company;
o Transformed our Board with fresh perspectives and experienced leadership
so that our 2015 slate will include a total of five nominees – a majority
of the Board – who are new or who have served only one year; and
o Engaged in productive, ongoing discussions with stockholders and
incorporated their input into the Company's latest actions, including our
recent sale leaseback transaction, the nomination of our new Board
candidates and several governance policy improvements.
Now is an exciting time for the Company, as we are just starting to reap the
benefits of these efforts, as evidenced by Axcelis' strong operating and
financial performance in the fourth quarter of 2014, strong solid outlook for
2015 and significant recent stock price appreciation – up 67% since our 2014
Annual Meeting.
DEVELOPMENT OF THE PURION PRODUCT FAMILY IS WELL TIMED AND
THE PLATFORM IS GAINING MOMENTUM WITH CUSTOMERS
Beginning with decisions made in 2011, the Axcelis management team and Board
maintained sufficient critical investment in the Purion technology throughout
a period of lower revenues. As a result, the industry-leading Purion platform
is now beginning to drive substantial stockholder value.
Axcelis' development of a full Purion product family over the last several
years comes at an excellent time, as the ion implantation market is poised for
disruption. The Purion H, M, and XE give Axcelis access to 100% of the ion
implantation market, something the Company had not achieved with its
first-generation Optima single wafer products. More importantly, the Purion
common platform, innovative scanned spot beam technology, advanced energy
filter and Eterna ELS source have enabled the Purion products to gain momentum
rapidly with potential customers:
o Two customers in the memory market are experiencing the full power of the
Purion platform – with all three types of Purion products running in
production.
o The newest member of the family, the Purion H high current system, was
first shipped in July 2014, and to date, the Company has installed six
Purion H in multiple fabs for memory applications, and expects additional
shipments in Q1 and Q2. The introduction of Purion H is critical to
Axcelis' market share gains, since the high current market represents 60%
of the ion implant market.
o There are multiple Purion M medium current systems running in production
at memory and foundry fabs, and customer interest is high.
o The industry-leading Purion XE high energy implanter continues to have
success in memory and non-memory markets including sensors, power devices
and specialty logic chips.
Looking ahead, we believe 2015 will be a year of significant demand for Purion
– with the memory requirements for both DRAM and NAND in mobile devices and
data center applications increasing rapidly.
THIRD PARTIES AGREE THAT WE ARE POISED FOR GROWTH
WITH A PROMISING STRATEGY^i
"We have noted that the crux of the long-term story lies in the company's
ability to gain traction for its new Purion product platform (medium and high
current). On this front, the company is also executing well, where it is
already seeing high volume production acceptance faster than expected for its
Purion H (high current) product. One leading-edge memory customer has
implemented Purion H into its new DRAM fab, while a second DRAM customer is
currently in evaluations... Additionally, the company is targeting to seed an
evaluation unit with a leading-edge foundry for next generation FinFET
production. We believe these moves not only favorably set up growth in 2015
but beyond as well." – Patrick Ho, Stifel, Nicolaus & Company, February 6,
2015
"ACLS appears well positioned for an exceptionally strong 2015, and we expect
the stock to move higher as the company garners more wins." – Y. Edwin Mok,
Needham & Company, February 6, 2015
"The faster than expected ramp of Purion H systems is starting to show the
potential for ACLS to reach longer term goals of $115MM+/$0.20+ in peak
quarterly revenue/EPS (Co targets by C17). Our increased target multiple
represents increased confidence in meeting the longer term targets." – Brett
Piira, B. Riley & Co., February 6, 2015
AXCELIS HAS TAKEN DECISIVE STEPS TO INCREASE PROFITABILITY AND DRIVE
STOCKHOLDER VALUE
Reducing Operating Expenses – Axcelis has maintained strong cost control
discipline throughout Purion's development. Over the past several years, the
Company has reduced SG&A and R&D significantly. From 2011 to 2014, our
employee and temporary worker headcount dropped from 1,046 to 765,
representing a 27% reduction. In 2012, 2013, and most recently, during the
2014 mid-year industry pause, Axcelis implemented three weeks of unpaid
furloughs, further controlling costs. In addition, our management team
continually evaluates additional cost reduction initiatives with an intense
focus on optimizing the cost structure of the business without negatively
impacting investments in Axcelis' future.
Enhancing Gross Margin – As we conclude the ramp-up of Purion H production
from a cold start, which naturally had an impact on gross margin, the Company
has a detailed gross margin improvement roadmap in place to exit 2015 in the
high end of the mid-30% range, and to achieve over 40% gross margins by 2017.
Combined, these actions have created significant operating leverage, which
will translate to increased profitability and cash generation as top-line
growth continues to be realized.
Improving Capital Allocation and Balance Sheet Utilization – Development of an
ion implantation system is inherently capital-intensive, and our capital
allocation discipline continues to be a critical element to Axcelis' success.
Over the past several years, the Company has divested all of its non-core
assets, including the dry strip business, to focus exclusively on ion
implantation products. The majority of the required investment for the Purion
platform has been made and is starting to pay dividends.
In addition, as we announced in early February, the Company completed a sale
leaseback transaction for Axcelis' headquarters building with an affiliate of
Middleton Partners. Under this transaction, the Company received a purchase
price of $49 million in cash, and signed a 22-year lease on the property with
very favorable terms. The sale leaseback further enhanced our strong balance
sheet and flexibility as we grow the business.
AXCELIS' NEWLY ESTABLISHED MANAGEMENT TEAM AND BOARD ARE COMMITTED TO ACTING
IN THE BEST INTERESTS OF ALL AXCELIS STOCKHOLDERS
Over the past several years, Axcelis has taken significant actions to build a
seasoned and experienced management team and to institute best practices in
corporate governance. The Company has named new executives to four of the six
top management positions, including:
o Kevin Brewer as Executive Vice President and Chief Financial Officer in
June 2013.
o John Aldeborgh as Executive Vice President, Customer Operations in January
2013.
o Bill Bintz as Executive Vice President of Engineering and Marketing in
April 2011.
o Doug Lawson as Executive Vice President of Corporate Marketing and
Strategy in November 2013.
In planning for anticipated Board succession, Axcelis commenced a program in
2011 to refresh our Board of Directors. Specifically:
o In 2011, Joseph Keithley was added to the Board. Mr. Keithley spent almost
20 years as the Chairman, CEO and President of Keithley Instruments, and
has brought to Axcelis significant operating experience and industry
knowledge.
o In 2014, stockholders elected two new Board members: Arthur George and
Barbara Lundberg. Mr. George spent 30 years at Texas Instruments, and has
brought deep semiconductor industry knowledge to the Board. Ms. Lundberg
was the CEO and Vice Chairman of the Supervisory Board of Tele-Fonika, and
has provided significant strategic, operational and financial execution
expertise.
As expected, in August 2014, as part of our Board renewal program, three
current Axcelis Board members, Stephen Hardis, Brian Thompson and William
Jennings indicated their desire not to be nominated for re-election in May
2015. In connection with these decisions, our Board adopted a policy not to
nominate director candidates who would be 75 years old or older upon
election. Our three retiring directors all made significant contributions to
our efforts over the years, and played strong roles in the implementation of
the Purion strategy and the enhancement of the Axcelis management team,
discussed above. We thank them deeply for their contributions.
At the 2015 Annual Meeting, the Company will be nominating three highly
qualified new directors, each of whom will bring fresh and valuable
perspectives to our diverse Board. Notably, as part of our ongoing commitment
to our stockholders and listening to their viewpoints, these new candidates
were selected in conjunction with stockholder feedback. The nominees include:
o Jim Green, who will bring strong operating experience and a commitment to
turnaround management to the Axcelis Board. He has been the Chief
Executive Officer and President of Analogic Corporation since 2007. From
2005 to 2007, Mr. Green was Regional Vice President, California Division,
of Quest Diagnostics Incorporated, a leading provider of diagnostic
testing information and services. Before joining Quest, Mr. Green served
as Senior Vice President & General Manager of Computed Tomography for
Philips Medical Systems, a global leader in the business of developing,
manufacturing, marketing, and servicing medical computed tomography
systems.
o Duy-Loan Le, who is a recognized semiconductor technologist with broad
board experience and extensive experience in various aspects of
semiconductor design and manufacturing. During her 31-year career at Texas
Instruments, Inc., Ms. Le became the first woman at TI elected to the rank
of Senior Fellow. Prior to this role, she held leadership positions
throughout TI. Ms. Le is currently the Embedded Processing (EP) RAMP
Manager, responsible for technology readiness and product execution for
TI's multibillion-dollar digital business. Ms. Le has been awarded 24
patents and has seven pending patent applications. Ms. Le is also a board
member at National Instruments, a supplier of measurement and control
hardware and software to the engineering and scientific communities to
accelerate productivity, innovation and discovery, and eSilicon, a leading
independent semiconductor design and manufacturing solutions provider.
o Thomas St. Dennis, who will bring a career's worth of significant
semiconductor experience, having served as the Chief Executive Officer at
FormFactor Inc. from 2010 to 2014, and as the Company's Executive Chairman
of the Board of Directors since 2013. Prior to FormFactor, Mr. St. Dennis
held various positions at Applied Materials, Inc. from 1992 to 1999 and
again from 2005 to 2009. He also served as Executive Vice President of
Sales and Marketing at Novellus Systems, Inc. from 2003 to 2005. From 1999
to 2003, Mr. St. Dennis was President and CEO of Wind River Systems,
Inc. Mr. St. Dennis is currently a director of Mattson Technology, Inc., a
provider of semiconductor wafer processing equipment used in the
fabrication of integrated circuits.
The Board is also nominating six current members, three of whom joined the
Board in the past four years:
o R. John Fletcher is Chief Executive Officer of Fletcher Spaght, Inc., a
strategy consulting organization, which he founded in 1983, and Managing
Director of Fletcher Spaght Ventures, a venture capital fund. Prior to
founding Fletcher Spaght, Inc., Mr. Fletcher was a Manager at the Boston
Consulting Group. Mr. Fletcher is also a director of The Spectranetics
Corporation. During the past five years, he was also a director of
AutoImmune, Inc., Panacos, Inc. and Marina Biotech, Inc.
o Arthur L. George, Jr. has had a 30 year career at Texas Instruments, one
of the world's largest semiconductor companies and a highly innovative,
high performing global leader in analog, embedded processing and wireless
technologies. Until recently, Mr. George served as Senior Vice President
and Manager of TI's Analog Engineering Operations, a position he held
since 2010. Prior to this Mr. George served as Senior Vice President and
General Manager of TI's High Performance Analog business unit. In addition
to Axcelis, Mr. George also serves on the Board of Directors of Nordson
Corporation, a manufacturer of precision dispensing equipment.
o Joseph Keithley has over three decades of experience in high technology
markets. Most recently, Mr. Keithley was Chairman of the board, Chief
Executive Officer and President of Keithley Instruments, a supplier of
test and measurement systems for the electronics, wireless and
semiconductor industries, until the company's sale last year. Since he
joined Keithley Instruments in 1976, he held several executive and
management positions with the company. In addition to Axcelis
Technologies, Mr. Keithley holds the position of Chairman of the board at
Nordson Corporation and is on the board of directors of Materion
Corporation.
o Barbara J. Lundberg has over thirty years of significant executive
experience across multiple industries, including deep experience with the
issues confronting growing technology and technology-based equipment
companies. From 2012 to 2013, Ms. Lundberg served as CEO and Vice Chairman
of the Supervisory Board of Tele-Fonika Kable, one of the largest cable
manufacturers in Europe. Prior to that, Ms. Lundberg was a consultant with
Kolaja & Partners, now part of Alvarez & Marsal. Between 1999 and 2001,
Ms. Lundberg was CEO of Elektrim S.A., a multi-industry conglomerate and
one of the largest companies in Poland. Earlier in her career, Ms.
Lundberg worked primarily with U.S. technology and emerging growth
businesses, including opening the Silicon Valley office of Apax Partners.
o Patrick H. Nettles has served as Executive Chairman of the Board of
Directors of CIENA Corporation, a manufacturer of optical networking
equipment, since May 2001. Prior to that, Mr. Nettles served as Chairman
of the Board of Directors and Chief Executive Officer of CIENA from
October 2000, as its President, Chief Executive Officer and Director from
April 1994, and as its Director and Chief Executive Officer from February
1994. Mr. Nettles is a director of Progressive Corporation.
o Mary G. Puma is Axcelis' Chief Executive Officer (since January 2002) and
President (since May 2000). Ms. Puma has also served as Chairman since May
2005, a position that will be assigned to an independent director
immediately following the 2015 Annual Meeting. Prior to becoming Chief
Executive Officer, Ms. Puma served as Chief Operating Officer from May
2000. In 1998, she became General Manager and Vice President of the
Company's predecessor, the Implant Systems Division of Eaton Corporation,
a global diversified industrial manufacturer. In May 1996, she joined
Eaton as General Manager of the Commercial Controls Division. Prior to
joining Eaton, Ms. Puma spent 15 years in various marketing and general
management positions for General Electric Company. Ms. Puma is also a
director of Nordson Corporation and of Semiconductor Equipment and
Materials International (SEMI), a trade association.
With the nominations of Mr. Green, Mr. St. Dennis, and Ms. Le, five of our
nine nominated directors will have served one year or less on the Axcelis
Board, and all are independent, other than Ms. Puma.
Lastly, as noted in Ms. Puma's above biography, to further enhance our
corporate governance, the Board will select one of the independent directors
to serve as a new independent Chairman of the Board at the May 2015 Board
Meeting.
WITH THE RIGHT PLAN AND LEADERSHIP IN PLACE, AXCELIS IS WELL POSITIONED FOR
CONTINUED SUCCESS
The Board is committed to maintaining an open dialogue with our stockholders,
and we consider stockholder input as part of our ongoing focus on creating
long-term value and ensuring good corporate governance. We are listening – in
fact, we have implemented many suggestions from our investors, such as
encouraging us to pursue a sale leaseback and providing us with names of
potential Board candidates.
We believe we have made great progress over the past several years toward
enhancing our business and capital structure, while regaining market share in
the ion implantation market. As a result, Axcelis is well-positioned with our
Purion strategy and enhanced leadership team to gain further market share,
improve financial results and drive long-term value for all stockholders.
Instructions for how to vote for Axcelis' Board nominees will be sent to you
separately when we file and mail you our proxy materials.
Thank you for your continued support of Axcelis.
The Board of Directors of Axcelis Technologies, Inc.
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