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Novellus strengthens deposition position with purchase of Varian PVD business

"Eat or be eaten" may not be the most elegant description of the reason Varian Associates chose to sell its thin-film systems division to Novellus Systems, but it touches the core thinking behind the decision. The Palo Alto, CA­based equipment vendor signed an agreement in May to divest the business unit for $150 million in cash.

"The rationale [for the sale] is very straightforward," explained Gary Simpson, Varian's corporate vice president for marketing and communications. "In a market like PVD the key to success is getting bigger when you've got a major competitor like Applied Materials, which is so large. That meant for the [thin-film business] to be successful it had to either get bigger or get sold. In wrestling with that problem the deal with Novellus worked out, and we think it'll be a win-win situation for both companies. We're quite pleased with how it's going."

The purchase was expected to close by mid-June, Simpson said on June 5. "The transaction is going about as we expected. There are no major hitches thus far. There are always issues to be resolved, but nothing that looks like it will be a barrier to completing the deal."

Novellus expects its entry into the PVD market to provide synergy with its well-established CVD cluster tool line in interconnect metal processes. The sale includes Varian's plant in Palo Alto, as well as sales and service facilities both in the United States and overseas. All of the business unit's staff of approximately 450 employees will be kept on by Novellus. "This step positions both organizations to take even better advantage of their unique and highly complementary capabilities," said Richard Aurelio, executive vice president of Varian's semiconductor equipment group.

More than 800 of Varian's thin-film coaters are installed in fabs worldwide. Varian will continue manufacturing and marketing its line of implanters through the ion implant systems division in Gloucester, MA. That business has grown rapidly over the past few years, said J. Tracy O'Rourke, Varian's chairman and CEO, adding "it has the critical mass to continue as a highly successful stand-alone operation." Proceeds from the sale to Novellus will be used to develop new products and acquire complementary businesses, products, and technology, he said.

In May Novellus settled a patent infringement case brought by Applied Materials. Novellus agreed to pay $80 million in damages to Applied and a royalty for all future shipments of the company's TEOS-based systems. As part of the settlement, the vendors agreed to cross-license patents related to certain aspects of CVD technology. The settlement allows Novellus to continue selling TEOS-based CVD systems. Novellus's systems can process up to seven wafers at a time.

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