Ortel Focuses on Broadband Market
By: Kristin Lewotsky
Times may be difficult, but the future looks encouraging for laser manufacturer Ortel Corp. The company reported revenues of $16.9 million for the third quarter of fiscal 1999 (January 31), down 9% from the $18.6 million recorded for the same period one year ago. As expected, the quarter resulted in a net loss of $1.1 million ($0.09 per share), compared with a net income of $605,000 ($0.05 per share) for third quarter 1998.
A late entry to the 980-nm pump laser market, Ortel recently pulled out of that segment, electing to focus instead on its broadband product line for satellite and cable television applications. "We were late in the game," acknowledged John Rinks of Ortel, noting that the company developed a business model that assured profitability in the face of 20% price erosion. Unfortunately, pressure by erbium-doped amplifier manufacturers to cut pump laser costs, as well as sheer volume of sales, forced the actual price erosion far higher, in a market dominated by established players. Faced with its inability to achieve profitability on this product line, Ortel made the pragmatic decision to cut its losses and exit the market.
The company is now concentrating on its broadband product line, which had revenues of $12.0 million for the quarter, up 6% from the $11.3 million logged for third quarter 1998. In particular, satellite product sales rose 33% from 1998 to reach $4.9 million. Ortel is pinning its hopes on terrestrial satellite-system components operating from 860 nm to 950 nm. The market is currently wide open, and with customers such as Bell South, GTE, and Bell Atlantic evaluating its devices for this wavelength band, Ortel has good reason to be encouraged.
In the near term, the company said, order patterns in the third fiscal quarter would negatively impact sales growth in the current fourth quarter, indicating that there may not be sufficient revenue to produce profitability. "Ortel is committed to returning to profitability through a transition program that focuses on strengthening our broadband product line,'' said company president and CEO Wim Selders.