ASM Int'l in the Right Direction

ASM International (ASMI - Snapshot Report) is an OEM [original equipment manufacturer] of both front-end and back-end semiconductor manufacturing equipment. The back-end business has gained significant momentum in the past two years, while the front end business has struggled to become profitable.

On June 6, 2008, Applied Materials Inc. (AMAT - Analyst Report) offered to buy two of ASM's units for $400 million to $500 million. ASM has so far shunned all offers and the deal appears off for now.

Ironically, the front-end is now outperforming the back-end. We rate the shares of ASMI a Buy. Although back-end order strength indicates that the business will perform poorly in 2009, the balance sheet restructuring and lowering of break-even was a step in the right direction. Consequently, we are setting a target price of $10.00.

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