This Week, Industry Snapshot Looks at
Laser Systems

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Cymer, Inc.

Excel Technology, Inc.

General Scanning, Inc.

Palomar Medical Technologies

Rofin-Sinar Technologies

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This Week's Industry Snapshot

Developing commercially viable applications for laser technology has proven difficult. Historically, the cost of lasers and their unreliability and unwieldy nature have relegated them to the laboratory and a scant few niche applications. The running joke within the industry is that lasers are the perfect solution in search of a problem. This has resulted in many companies within the ill-defined industry being branded with the nebulous "developmental stage" moniker, accompanied by a rolling twelve-month time horizon for product development.

In the past, laser products only penetrated markets where cost was not a significant factor, or in applications where there were few viable alternatives. Their greatest success has occurred in the medical and semiconductor fields, but this is beginning to change. As the cost of lasers continues to decrease (along with their size), and as imaging and positioning technology continues to mature, lasers are beginning to encroach into the manufacturing segments of the electronics and machining markets.

A history of unrealized expectations and earnings disappointments has fostered a general disdain for the group, creating an inefficiency in its valuation as the entire segment is painted with the same broad brush. Since the companies operate in many diverse industries, such as medical, communications, automotive, aerospace, semiconductor and consumer electronics, their valuation multiples are often skewed toward the sectors they operate in. For example, laser companies with significant exposure to the semiconductor and electronics industries are usually valued at multiples significantly lower than those awarded to companies that provide products for the healthcare industry. In addition, laser companies have a poor following on Wall Street, with only a handful of analysts covering the fortunes of the largest players. The end result is that an excellent opportunity for individual investors has been created in which investors can begin to follow a growing industry at a point where maximum pessimism prevails.

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