Ultratech Corp. (A)

In August 1998, Kerry King, president and CEO of Ultratech Corp., looked with great interest at the changes that were occurring in the technology industry. Ultratech Corp. had an opportunity to enter into a strategic merger transaction that would make the combined company the undisputed leader in its market segment. The transaction, a multi-billion dollar deal, made a lot of sense to Kerry, his board of directors, and Ultratech's outside financial advisors, with one caveat. As a result of a technical accounting issue, pooling accounting was not available for the merger. Under purchase accounting, Kerry was advised that significant amounts of goodwill would be created and amortized over future fiscal years, effectively destroying the combined company's reported earnings. The challenge confronting Kerry was whether to consummate the merger and risk the earnings damage or to let an otherwise perfect opportunity pass. Kerry's decision could profoundly impact the future of his company and the fiber optic telecommunications industry as a whole.