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07 Aug 2013
Company looks to cut losses amid competitive pricing and delayed development work at its JK Lasers subsidiary.
Problems with the development of lower-cost kilowatt fiber lasers at its subsidiary JK Lasers have prompted GSI Group to re-evaluate its strategy in the fast-growing sub-sector of the laser industry.
During an investor call to discuss the parent company’s latest financial results, GSI’s CEO John Roush said that JK faced increasing challenges as it looked to carve out a competitive position against market leader IPG Photonics and the likes of Rofin-Sinar:
“The low cost fiber laser architecture has proven to be difficult to manufacture,” Roush said, adding that the “significant re-work” needed was impacting cost savings that the firm had been targeting, and had also hit GSI’s profit margins.
“This has delayed the launch time,” Roush explained. “At the same time, we’ve seen that market price levels have declined more and faster than we had anticipated. The combination of these factors has led us to be much more cautious and selective in pursuing fiber laser revenue, resulting in a decline in our revenue in the second quarter.”
Despite those problems, he is still anticipating that fiber lasers will bring in somewhere in the region of $10 million in sales this year. But the impact of the development overruns on costs has got to the stage where GSI is looking at “several different options” to cut its operating losses on the products.
“We intend to return the business to a near break-even profitability on a run rate basis by year-end,” the CEO told investors.
Priority area
Fiber lasers have been seen as a key part of GSI’s future growth strategy, with Roush citing the technology as one of three priority areas – along with laser scanning solutions and the medical sector.
JK Lasers had been aiming to add to its existing range of industrial fiber lasers with a 4 kW product this year, and at the recent Laser World of Photonics exhibition in Munich it showed off a 1.2 kW fiber laser based on a new OEM module concept and aimed at high-throughput cutting and welding applications.
Partly as a result of the fiber laser issues, GSI reported sales of $46 million for its laser division in the latest quarter, down slightly on the same period last year. The company’s “precision technology” segment contributed the remainder as total quarterly revenues came in at $85.3 million.
The other brands in GSI’s laser products portfolio include the carbon dioxide laser specialist Synrad, high-energy YAG provider Continuum, and Cambridge Technology, whose galvanometer-based scanners are used in high-speed beam delivery systems.
Also during the latest quarter, GSI's equity stake in UK-based Laser Quantum, which specializes in solid-state and ultrafast lasers and oscillators, increased from 25.1% to 42.1% as a result of a share buy-back program initiated by Laser Quantum.
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