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“Right-sized” Newport hopeful of second-half recovery

21 Feb 2013

Californian firm re-organizes business around lasers, optics and photonics; writes down Ophir acquisition loss.

Photonics industry giant Newport says that it is hopeful of improving market conditions in the second half of 2013, and will be seeking to take advantage with a streamlined and reorganized company structure.

The Irvine, California, company reported a heavy net loss on declining sales in the closing quarter of 2012, but senior executives told investors that they believe current demand levels represent the bottom of the market.

Newport posted year-on-year declines of more than 10% for both total orders and sales in the quarter, with all application segments except industrial manufacturing showing a downward trend.

Ophir write-down
Writing down a previously announced non-cash charge of $130.9 million relating to the value of the Ophir Optronics business acquired in 2011 gave Newport’s bottom line a nasty look – producing net losses of $113.3 million and $91 million for the quarter and the completed financial year respectively.

However, following recent cost-cuts, the company’s underlying financial performance looks healthy, with Newport generating more cash in the fourth quarter of 2012 than at any other period in the year – despite the falling revenues.

CFO Chuck Cargile highlighted that in an investor call to discuss the latest results, saying: “We're confident that we've right-sized our business and that we're capturing the top line and bottom line synergies from the businesses we recently acquired.”

While he and CEO Robert Phillippy remain cautious of any near-term pick-up in demand, they stress that the company is now in a stronger position to benefit from an expected market improvement – particularly in the important microelectronics sector – in the second half of this year.

“Based on the input we have received from our customers, we expect market conditions to improve during the course of 2013 and our sales to increase in the second half of the year,” Phillippy said.

Re-organized reporting structure
As of January 1, the Newport business has been re-organized around three reporting segments – namely lasers, optics and photonics – and at the moment the lasers business (largely Spectra-Physics and High Q) is showing the lead, with sales of $44.9 million and record operating margins in the latest quarter. Cargile added:

“We're becoming increasingly confident that we will achieve top line growth in our laser business through a combination of improved overall market conditions in the second half of 2013, the successful introduction of new products and increasing customer penetration with our existing products.”

Newport introduced three dozen new products, many of them lasers, at the recent SPIE Photonics West trade show. CEO Phillippy singled out the company’s new hybrid “Quasar” laser, which combines a fiber laser source with a solid-state amplifier, as a key launch for microelectronics applications.

The highly pulse-configurable Quasar offers more than 40 W of average output in the ultraviolet, and Newport told optics.org at Photonics West that it was already engaged with customers keen to use the tool in applications like PCB manufacturing.

“We believe this product could be a game-changing solution for mobile device manufacturing,” Phillippy told investors. “Quasar has demonstrated superior results in a variety of micromachining applications, including high-speed, high-precision cutting and drilling of flat panel display glasses, semiconductors and PC boards. We have already received several significant orders for Quasar and expect to begin production shipments of the product this quarter.”

Newport's stock rose by around 8% in early trading following the company's Q4 2012 update, and has increased in value by close to 50% since early November.

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