A 20-year epoch has ended at automated optical inspection equipment company Orbotech (Nasdaq: ORBK). Veteran CEO Yochai Richter is resigning. At the beginning of the year, we wrote that Richter was likely to vacate the CEO seat, and appoint one of the three co-presidents to replace him, and so it has transpired. Today, at the same time as it released its good first quarter financials, Orbotech announced that Richter was leaving his post as CEO, and that he would become active chairman. Raanan (Rani) Cohen, 51, one of the three co-presidents, will replace him as CEO.
Richter (63) will serve as chairman of the board together with Dr. Shlomo Barak for an interim period until December 31, 2006, after which Dr. Barak will cease to hold the position of chairman but will remain a member of the board. Barak has been a director since 1981. Since 2002, Orbotech has had three co-presidents: Cohen; Arie Weisberg (55), who has been with the company since 1991 and who has now been appointed to the position of president and chief operating officer; and Eyal Harel, who will be leaving the company after 18 years.
Orbotech produces automated optical inspection equipment for printed circuit boards (PCB) and flat panel displays (FPD.) It has a market capitalization of some $840 million.
It's unlikely that anyone expected a sentimental word from Richter in the company's announcement, but if they did, they were disabused. Richter only made mention of the new-old managers. "Since joining the company over two decades ago, Rani Cohen has accumulated very extensive knowledge and expertise in all areas of Orbotech's business; and during his tenure as a co-president he has demonstrated vision and leadership that make him ideally suited to the position of chief executive officer," he is quoted as saying.
'"The board is also very pleased with Arie Weisberg's appointment to the position of president and chief operating officer, in which he will draw on his vast knowledge and experience in the management of global resources. Both he and Rani Cohen have my unequivocal support and that of the entire board of directors, and we wish them and the company every success in the future. In addition, the company wishes to express to Eyal Harel its sincere appreciation for his years of outstanding dedication and service, and for his singular contribution to the company's development and success," Richter continued.
The departure of a CEO, especially after a long period with a company, is usually liable to cause no small upset. In the case of Orbotech, however, the change of personnel can be expected to go fairly smoothly. When the co-president regime was started in 2002, it was already clear that Richter was on the way to retirement, and he dropped a gear as far as day to day management was concerned.
Richter was one of the founders of Orbot, which merged with Optrotech to form Orbotech, and has been CEO since 1992. He currently owns 3.8% of the company, a holding worth some $32 million. As a manager he has shunned the limelight. He is the older brother of Kobi Richter, chairman and founder of Medinol, who himself is a director of Orbotech and holds 4.3% of its shares.
As to the numbers: revenue for the first quarter of 2006 totaled $101.4 million, compared with the $100.5 million in the first quarter a year ago. The consensus analysts' estimate was for revenue of $97.3 million. Net profit for the first quarter of 2006 was $14.1 million, or $0.43 per share (diluted), compared with net profit for the first quarter of 2005 of $10.6 million, or $0.32 per share (diluted).
These results reflect the adoption, on January 1, 2006, of revised Financial Accounting Standard No.123, "Share Based Payment", which resulted in increased compensation expenses totaling approximately $1.5 million in the first quarter without any reduction in income taxes, and a corresponding decrease in diluted earnings per share of $0.04.
Sales of equipment to the PCB industry relating to bare PCBs were $41.0 million in the first quarter of 2006, compared with $38.4 million in the fourth quarter, and $30.1 million in the first quarter, of 2005. Sales of FPD inspection equipment were $30.0 million, compared with $28.1 million in the fourth quarter, and $43.2 million in the first quarter of last year.
FPD revenue in the first quarter of 2005 included $17.5 million from the recognition of initial revenue relating to the company's 7th generation in-line FPD-AOI systems, delivered to Samsung. in the second half of 2004.
Sales of equipment to the PCB industry relating to assembled PCBs were $9.2 million, compared with $8.4 million in the fourth quarter, and $6.2 million in the first quarter, of last year. Sales of automatic check reading products were $2.3 million, compared with $2.1 million in the fourth quarter, and $2.3 million in the first quarter, of 2005.
Service revenue for the first quarter of 2006 was $18.9 million compared with $19.3 million in the fourth quarter of 2005, and $18.7 million in the first quarter of that year.
The company completed the quarter with cash equivalents and marketable securities of $207.9 million, compared with $211.4 million at the end of 2005. Orbotech said this decrease primarily reflected the longer payment terms traditionally associated with sales in Japan, which has accounted for a growing proportion of the company's revenue over the last two quarters
Orbotech said that its results for the first quarter reflected the continued, positive business environment in the electronics industry, as well as its ability to capitalize on the resulting opportunities, and that these led to strong gross, operating and net margins, with gross margins in the first quarter exceeding 45%. Recently, the company received, from a customer in the Far East, its largest order ever from a single electronics manufacturer for multiple PCB-AOI systems, totaling in excess of $15 million and scheduled for delivery throughout the last three quarters of 2006.
Commenting on the results, Rani Cohen said: "Our strong first quarter operating results mark the beginning of what we expect will be a successful 2006. With yield-management playing an increasingly important role in advanced technologies and improved profitability, our products and solutions enable our customers to achieve manufacturing successes in ramping up their current and future production lines, and enable us to maintain our position as an industry leader."
Published by Globes [online], Israel business news - www.globes.co.il - on May 8, 2006
© Copyright of Globes Publisher Itonut (1983) Ltd. 2006