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Datron

Five years ago, Dave Derby knew his company was headed for trouble.

The Cold War was winding down, and with it the prospects for his company, Datron Systems Inc., which makes high-end antennas for tracking rockets, aircraft and missiles at its Simi Valley plant.

Derby, president and chief executive of the Escondido-based company, recognized that Datron would have to find commercial applications for the technologies that had been developed for the military.

Five years later, Datron has emerged as a leading producer of mobile direct broadcast satellite (DBS) antennas for buses, boats, trains, recreational vehicles and long-haul trucks. There is also an experimental version designed for use on planes, which spawned the land and sea version.

It remains unclear whether the company can find a viable consumer market for its DBS antennas, which have been on the market since November 1995.

“The way they market it is a big problem,” said Deborah Lowenthal, an analyst at the Red Chip Review, a small capitalization stock research publication. “Up to now they’ve just not entered those markets correctly.”

Even so, Lowenthal is not ready to write off the effort yet, citing the potential of a huge consumer market for DBS antennas in cars and boats.

“I think in the long term, this company has a lot of potential,” she said.

In fact, Datron appears to be on the mend. While sales for the 12 months ended March 31 were off 13 percent from a year earlier, the company had net income of $268,000, compared with a loss of $1.2 million the year before.

Derby acknowledged there were distribution problems in entering the new market, which, he said, “resulted in disappointing sales for our first full year of selling this consumer product.”

The company would not disclose DBS-specific revenue figures. But Derby did say that by the end of fiscal year 1997 (March 31), about 5,000 units had been delivered to RV and boat dealers nationwide.

“Despite these problems,” said Derby, “we are building a network of quality recreational vehicle dealers to sell our products and are currently supplying our DBS products to over 25 RV manufacturers.”

The company’s Simi Valley-based antenna and imaging systems division, Datron/Transco, handles production of the antennas. The facility employs 185 people and covers 140,000 square feet.

The antennas vary in size and shape from an 18-inch dish for use on recreational vehicles, which is similar to those for homes, to dishes several feet in diameter for use by the military.

But military cutbacks are taking their toll. Sales of antenna and imaging systems were $31.8 million in 1996, down from $42.1 million in 1995, reflecting Department of Defense cutbacks, company officials said.

As a result, the company has begun shifting its emphasis to commercial sales.

“Now, about 70 percent of our business is commercial and 30 percent military,” said Bill Weaver, vice president and general manager of DBS products Division of Datron/Transco.

In 1995, DirecTV Inc., the GM Hughes Electronics Corp. subsidiary, tapped Datron for a project equipping commercial jetliners with satellite television.

“We brought together a team including Delta Airlines and Datron,” said Robert Walzer, Director of Airborne DBS of Hughes Avicom International, an in-flight entertainment systems company based in Pomona.

“We actually provide the overall system and then about two-thirds of the components of the system and we get the actual antenna from Datron,” Walzer said.

The antenna mounts on the fuselage of a plane to bring DBS TV to domestic airline travelers. The antenna constantly tracks a satellite in geostationary orbit as the plane changes direction, using the plane’s internal navigation system. Each antenna will cost an estimated $50,000 to $60,000, Derby said.

The system was mounted on one plane, a Delta 767, on a trial basis last year.

Currently, passengers watch the same channel, one that the airline picks, on the existing in-flight movie screens. Depending on the flight, the channel may be CNN Headline News, Discovery Channel, or Nick at Night.

“The next phase is to bring (the TVs) to each seat, provide a credit card swipe and give customers the chance to choose channels,” said Derby. He expects this phase to start later this year.

But beyond the experiment, Erin Flynn, a spokeswoman for Delta, said she knew of no plans to buy additional systems.

Industry experts say installing the system would require a big capital investment. The aircraft would also have to be taken out of service to install the seat-back video displays.

Walzer said there are some potential buyers for the in-flight DBS system, which Hughes Avicom owns the rights to, but he wouldn’t mention names.

“We’ll see it on a few more airplanes within the next six or nine months. Maybe 20 to 30 airplanes within a year after that. And I think it will grow beyond that,” Walzer said.

Lowenthal, however, sees much more potential for the system on recreational vehicles and boats although now the system is pricey.

The most advanced model, which debuted in August 1996 and can deliver DBS reception while the vehicle moves, costs $7,000. The model for stationary vehicles costs $2,500.

One of the challenges of selling a new market was building a distribution network from scratch, said Weaver. The antennas were sold through boat and TV dealers across the country.

Nat Jeffrey, owner of Long Beach RV, a Datron distributor, said he has so far sold 15 to 20 of the stationary models. But they have yet to sell any of the mobile version.

“They’re the best on the market. It’s very simple. A lot of our customers are getting up in age and they don’t want to fuss,” he said.

But, he added, “I’d love the price to come down,” saying that the DBS system is too expensive for the average user.

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