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THIRD AVENUE FUNDS'
MARTY WHITMAN ET AL.
(continued from preceding page)
OID: Do you think their share is likely to change?
Jensen: I think they're very determined to be #1 or #2 in their respective markets or not be there. And I think within a reasonable time frame - maybe 12-18 months - that they will make a move in some of their businesses.
OlD: Any others?
Jensen: Technology is also ahead of market share at GaSonics International.
[Editor's note: FYI, on December 16th, GaSonics announced that its board had authorized the purchase of up to 500,000 of its 14.2-odd million outstanding shares.]
BUT GIVEN THE VALUATIONS AND FUTURE GROWTH....
OlD: You don't worry about Applied Materials or any other big players steamrolling these guys?
Whitman: We do. Over the long term, all of these companies are vulnerable. All of them are in danger of being unseated. That's why we're diversified.
OlD: So there's not much of moat.
Whitman: If they have a moat, it's limited - based in part on engineering, in part on how well they maintain their customer relationships, in part on whether or not they produce a high quality product with a low level of defects and in part on whether they deliver it on time.
OlD: There's no need to get personal.
Whitman: Also, the industry is very fast moving.
Lie: Agreed.
Whitman: Everyone has vulnerabilities on that score. No one is immune from that risk in this business. That's just one of the characteristics of the industry.
OlD: And don't these companies face a stiff headwind - and foreign competitors who enjoy cost advantages - given current exchange rates?
Lie: They do. That's definitely an issue.
OID: Also, couldn't an expensive U.S. dollar hamstring their ability to compete for who-knows-how-long?
Jensen: Sure. If the U.S. dollar stayed too expensive for an extended period, they could be in for a world of hurt. Their primary competitors outside the U.S., incidentally, are pretty much exclusively Japanese players.
Lie: But those Japanese players are very aggressive.
Whitman: We're sorry we don't own Tokyo Electron. We would if it sold at the kind of price as those we've discussed. It's not on our radar screen. But the last time that we looked, it was selling at around 24 times earnings, 3 times book and 1.5 times revenue.
OlD: How big are the Japanese players in this area relative to the American participants?
Jensen: Big. The two largest Japanese players in this business are Tokyo Electron and Tokyo Seimitsu - also known as TSK.
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