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Why KLA-Tencor Acquired Phase Metrics in 2001

In April 2001, KLA-Tencor acquired substantially all of Phase Metrics’ assets for about $18.9 million in cash, combining Phase Metrics’ back-end storage testing with KLA’s front-end metrology and inspection.
From TheFinanceBase Team2 min to read
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KLA-Tencor announced its planned acquisition of San Diego-based Phase Metrics on April 11, 2001, and bought substantially all of the company’s assets that month for approximately $18.9 million in cash, including acquisition costs. The strategic fit was complementary: KLA brought front-end data-storage metrology and inspection, while Phase Metrics supplied back-end inspection and test technology. KLA planned to combine them in a dedicated data-storage division.

Why did KLA-Tencor acquire Phase Metrics?

KLA-Tencor wanted to broaden its equipment and services for data-storage manufacturing. Its existing expertise was in front-end metrology and inspection; Phase Metrics focused on inspection and testing later in the manufacturing process. KLA expected the combined capabilities and commercial channels to help storage manufacturers manage yield across more stages of production.

At the time, KLA president and CEO Ken Schroeder described data storage as a growing high-tech market where yield management and process control were important to manufacturing success. KLA said it planned to combine products, sales, marketing and customer support, with the aim of creating what it called the industry’s largest storage yield-management force.

What did Phase Metrics make?

Phase Metrics supplied equipment used to inspect, test and certify data-storage components. StorageNewsletter’s historical account describes testers used to test and verify disk-drive heads and disks, as well as servowriters used by hard-disk-drive assembly plants. EDN reported that the company had more than 4,200 testers installed worldwide.

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That installed base gave KLA an existing footprint in storage manufacturing, while the company’s back-end test technology complemented KLA’s front-end inspection and metrology operations.

How much did KLA pay?

KLA-Tencor’s fiscal-2001 filing says it purchased substantially all of Phase Metrics’ assets in April 2001 for approximately $18.9 million in cash, including approximately $1.3 million in acquisition costs. This was an asset purchase, not a figure presented as the price for acquiring all of Phase Metrics’ stock.

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Purchase-price allocation in KLA-Tencor’s fiscal-2001 filing Amount
Net tangible assets $13.1 million
Identifiable intangible assets $4.9 million
In-process research and development $0.7 million
Goodwill Approximately $0.2 million

The filing’s allocation describes how KLA accounted for the acquired assets; it is not a separate list of additional payments on top of the approximately $18.9 million cash amount.

How was the deal supposed to expand KLA’s storage business?

The intended combination covered different points in the manufacturing process rather than duplicating a single product line.

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Business Manufacturing focus Role in the planned combination
KLA-Tencor Front-end data-storage metrology and inspection Process measurement, inspection and control earlier in manufacturing
Phase Metrics Back-end inspection and test Testing and certification capabilities for storage components and manufacturing operations

By pairing those portfolios, KLA aimed to offer storage manufacturers a broader set of tools and support across production stages. Its plan was to integrate the businesses’ products and customer-facing channels, not simply to add a standalone tester product line.

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Where would the combined division operate?

KLA announced that the planned data-storage division would operate from Phase Metrics’ existing facilities in San Diego, Fremont and Hayward, California. Frank Brienzo was named general manager. Those details describe the announced integration plan; they do not, by themselves, establish how the organization later evolved.

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What the transaction record establishes

The announcement and asset purchase both took place in April 2001. EDN reported the announcement and the installed base; KLA-Tencor’s fiscal-2001 filing records the purchase terms and asset allocation; and StorageNewsletter’s historical account describes the equipment’s uses. Together, these records show a strategic expansion into data-storage inspection and testing through a complementary asset acquisition. They do not establish a present-day product offering or the acquisition’s subsequent financial performance.

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