Credence, LTX plan merger, rationalization ahead

Credence and LTX yesterday announced plans to merge (see related story), leading to product-line rationalization and other efficiency improvements that could lead to annual cost savings estimated at $25 million, according to David Tacelli, CEO and president of LTX, speaking in a conference call this morning.

Lavi Lev, president and CEO of Credence, began the conference call saying that the merger would represent a continuation of efficiency improvements he has pursued at Credence. He said that when he joined Credence he was under no no illusions about challenges facing the ATE (automated test equipment) industry in general and Credence in particular. To meet those challenges, he refocused the company on the consumer semiconductor test market, divesting product lines not related to that core competency. (Credence last week entered into a definitive agreement to sell its automotive ATE operations in Amerang, Germany, to its test and measurement rival Advantest for $5 million.*) Lev said this morning that he retains confidence in the product platforms and the caliber of Credence employees, but noted that current market conditions merit the additional step of finding a partner that would complement Credence’s strengths. He said that LTX was such a partner—with both companies offering strengths in digital, analog, mixed-signal, and RF applications.

Tacelli said that like Credence, LTX has worked to rationalize its product lines and streamline production. He commented that Credence’s Spirox partner would enhance LTX’s presence in Asia.

The executives said that cost savings would accrue from factors such as the streamlining of management assets, logistics, financial reporting, and IT deployment.

Most interesting will be to see the product rationalizations that occur if the merger goes through. A big complaint of ATE customers weary of big price tags is the duplication of very expensive R&D efforts among the big-iron makers. Lev and Tacelli cited complementarities between the two companies’ product lines—but there seems to be significant overlap as well. We’ll see if the X Series, Diamonds, Sapphires, and ASLs* all survive.

*Update: The last line of my original post cited X Series, Diamonds, Sapphires, Falcons, and ASLs. The Falcon line has already been rationalized with the announced sale of Credence’s Amerang, Germany, operation to Advantest.