Ultratech Corp. (A)

Case Solution

Mary E. Barth, Ramez Toubassy, Andrew Baumbusch
Stanford Graduate School of Business ()

In August 1998, Kerry King, President and CEO of Ultratech Corp., watched the changes in the technology industry with great interest. Ultratech Corp. had the opportunity to complete a strategic merger that would make the combined company the undisputed leader in its market segment. The transaction, a multi-billion dollar deal, made perfect sense to Kerry, his board of directors, and Ultratech’s outside financial advisers, with one caveat. Due to an accounting problem, joint accounting was not available for the merger. In connection with purchase accounting, Kerry was notified that significant amounts of goodwill would be created and written off in future years, effectively “eliminating” the reported earnings of the combined company. The challenge Kerry faced was whether to complete the merger and risk “damage” to earnings or miss an otherwise perfect opportunity. Kerry’s decision could have a lasting impact on the future of his company and the entire fiber optic telecommunications industry.

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