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THIRD AVENUE FUNDS'
MARTY WHITMAN ET AL.
(continued from preceding page)
OID: He's old and decrepit?
Jensen: That's not exactly what I meant. I mean that he's been through multiple cycles.
Whitman: He was in here the other day. And their CFO, Russ Weinstock, was in here, too. They seem like good guys. Anyway, I like 'em.
OID: If we need to complete a foursome for Monopoly, I'll keep that in mind. But how would you rank them management-wise?
Lie: Because both have been through cycles together before, I think that experience helps 'em manage the swings.
Jensen: Most of the managers running these companies have been around for a long time. So they've been through multiple cycles. And that's a source of comfort to us.
OID: There are a lot more young fools than old fools...
Lie: Relative to the company's size (and we're talking about annual revenues of around $600 million) we think Silicon Valley Group's management is pretty good.
Whitman: Both of them are plenty good enough in our view. We can't cut it that fine.
OID: Nobody's perfect.
Whitman: It's not so much management-related. But more can go wrong at Silicon Valley Group than could go wrong at Applied Materials which we own, too. However, we re not buying Applied Materials today.
OID: Because of its price.
Whitman: Exactly.
OID: Is Silicon Valley Group dominant within one or more of their core niches?
Jensen: Silicon Valley Group isn't dominant in terms of market share, but it is dominant in terms of technology in the photolithography area. It sells its tools under the Micrascan brand name.
OID: But if it's dominant in terms of technology, why isn't it dominant in terms of market share?
Lie: What happened is that Silicon Valley Group had some problems during the peak times that kept them from being able to fulfill the demand of everyone who wanted to buy their machine. Therefore, although they were able to land some key accounts, they don't have market share leadership in that area yet.
Jensen: By the way, photolithography only accounts for about 50% of their sales and orders today. But it should account for a considerably higher percentage within the next year or two. They're not really anything special outside of that area. So Silicon Valley Group's future is in photolithography.
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