It is rare that a company divests a business with the number one position in the market, but Veeco Instruments’ agreement to sell its Metrology business to Bruker (see page 2) is just such a case. Veeco holds a dominant share in the scanning probe microscopy (SPM) market, of which the biggest segment is atomic force microscopes (AFM). SPM measures quantitative and qualitative surface properties with nanometer resolution by scanning the sample surface using a probe with an ultrafine tip. The over $250 million lab SPM market is growing in mid-single digits. The purchase will further diversify Bruker’s product portfolio and end-user markets.

Bruker is not new to the SPM market. Two years ago, the company acquired S.I.S. Surface Imaging Systems GmbH (see IBO 8/31/08) for $2.1 million and 59,342 shares of restricted unregistered stock. This time, the investment is much larger. Bruker will pay $229 million in cash for the Metrology business. In 2009, Veeco Metrology recorded sales of $97.7 million and an operating loss of $3.9 million due to the economic downturn. The business has since rebounded, as the economy and semiconductor market have improved. For the first six months of this year, the Metrology sales grew 40.1% to $31.7 million and orders increased 66.9% to $66.3 million. Veeco Metrology also recorded an operating profit of $3.4 million in the first half, compared with a $3.0 million loss for the same period last year. Operating profit increased due to higher sales and restructuring actions, including increasing parts procurement in Asia and the implementation of lean manufacturing. Before last year, the Metrology unit had not generated an operating profit since 2006.

Bruker expects the acquisition to add $130 million to 2010 revenues. Bruker spokesperson Stacy Desrochers told IBO that Bruker plans to add 350–400 employees as a result of the purchase. The business will join the Bruker Nano unit of Bruker AXS, part of Bruker Scientific Instruments. Bruker Nano’s product lines include the NANOS Series AFM/SPM systems, micro X-ray fluorescence spectrometry systems for elemental analysis, and the QUANTAX Electron Backscatter Diffraction detector for use with scanning electron microscopes. Ms. Desrochers told IBO that there is little overlap between the two companies’ product lines. Bruker stated that the acquisition will make it the global leader in instrumentation for materials research and nanotechnology analysis.

The addition of the Metrology business will give Bruker a greater presence in the semiconductor industry. Also, Veeco Metrology’s process SPM and Optical Industrial Metrology product lines will increase Bruker AXS’s products used for manufacturing applications, including photovoltaic production. The acquisition fits with Bruker’s diversification efforts of recent years. The company has steadily expanded its offerings for industrial markets through acquisitions. Such acquisitions include the purchase of three former Varian product lines (see IBO 3/15/10). For Veeco Metrology, applied and industrial end-users account for 45% of sales. Industrial research QA/QC and applied market sales together represented 20% of Bruker’s sales last year.

Bruker and Veeco Metrology each have a large base of academic and government end-users. Academia and government make up 55% of Veeco Metrology sales. In 2009, 58% of Bruker sales were to academia and nonprofits and 11% were to government. Veeco reported that 78% of Metrology bookings in the first quarter of 2009 were for scientific research. Research fields that use SPM include life science and materials characterization.

The acquisition can also be expected to increase Bruker’s sales in Asia as well as its Asian manufacturing and procurement. According to Bruker, 38% of Veeco Metrology sales are in Asia, 31% are in the Americas and 31% are in Europe. In 2009, Asia Pacific represented 24% of Bruker’s revenues.

Bar Graph: Veeco Metrology Annual Sales

2007 150.4

2008 127.9

2009 97.7