Ultratech Inc. (NDAQ:UTEK) found itself under pressure today from Thales Fund Management, who disclosed an 11% stake in the company and recommended that the company explore strategic alternatives to maximize shareholder value. The activist fund said that the company's unique, market-leading technologies are severely undervalued at the stock's current market price. They believe this is due to management's chronic underperformance of the business relative to management's expectations, which has resulted in surprising to the downside during past earnings announcements. Moreover, Thales noted that the company failed to accurately disclose operating trends, thereby creating a false sense of security for investors before blindsiding them with lower-than-expected earnings.

According to a letter attached to the fund's Schedule 13D filing with the SEC:

"These repeated operating disappointments have led to a disconnect between the high strategic value of Ultratech's technology and the price of Ultratech stock. Both Advanced Packaging and Laser Spike Annealing have significant growth prospects, and if the current underperformance continues into 2007 we will have to conclude that these opportunities can be better monetized as part of a larger organization. To that end, we hope that the board as well as senior management will be open-minded and proactive in contemplating a sale of the company as a way to maximize shareholder value."

Clearly, management's ability to capitalize on their unique technology is limited at best. After all, UTEK shares have dropped from a of $25.03 this year to their current level of $12.22, angering many long-term shareholders. A new management team would be able to maximize shareholder value by providing more transparent and accurate guidance in order to better connect with Wall Street analysts and general shareholders. The company has approximately $3.39 per share in cash with a book value of $7.77 per share and almost no debt. This makes it an attractive buyout target since the company's own cash could be used to finance a leveraged buyout. Combined, these things make Ultratech a stock worth watching over the next few months as management considers its options.

Read Full Letter to the Company

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