Optelecom-NKF undergoing 'major round of belt-tightening'

Bets on IP video will continue for surveillance and intelligent transportation
Wednesday, June 23, 2010

GERMANTOWN, Md.—IP video manufacturer Optelecom-NKF is undergoing a significant force reduction and change in its manufacturing operations as it strives for a profitability that has eluded it for the past three years.

In its most recent SEC filing, the company reported $1.65 million in losses on $7.2 million in revenues, and those revenues were down 17 percent from the same period last year. But the picture in the U.S. was worse. On just over $2 million in U.S. revenues, the company lost $1.15 million. Put another way, the U.S. market represented just 28 percent of sales, but accounted for 70 percent of the losses.

For this reason, according to investor relations manager Rick Alpert, Optelecom is “right-sizing” the U.S. operations. The manufacturing done at the facility here will be greatly reduced, as will the U.S. workforce, while manufacturing operations will be transferred to the company’s Netherlands plant and be party outsourced. Alpert emphasized that the company has taken great pains, however, to ensure that supply was not interrupted. All support staff, too, he said, have been retained.

“Overall,” said Alpert, “we’ve had a series of reductions in force and cost-cutting efforts going back to last fall, to September. We’ve already gone through a reduction in the Netherlands. We’ve completed that, and we’re now aligning the U.S. with actual revenues.”

He attributed the poor results to the fact that “sales of the IP product line have not hit our anticipated level,” yet “sales of CCTV and analog equipment have basically been slowing pretty dramatically all around the world. Overseas, we’ve been able to offset the sales of legacy systems with IP. In the U.S., we have not been as successful. The idea is to get the company right-sized, to get to break even or slightly positive, in Asia, Europe, and the U.S.”

Basically, he said, “it’s a major round of belt tightening as we work our way through this economic cycle.”

However, the company believes, said Alpert, that its investment in IP video will eventually pay off, and noted the recent success of its Siqura Traffic Server product, which combines IP video networking with traffic analytics. “We believe that type of product, where we partner with software vendors to create unique solutions, is what will drive the company going forward.”

While sales for the quarter were down $1.65 million year over year, IP video sales were slightly up, to $2.918 million. And in April, the company divested itself of its Electro Optics coil manufacturing business, which it sold to Nufern for $1.4 million.