ALHAMBRA If you’re a cable TV subscriber in the United States, there’s about a one-in-four chance that your programming comes to you via fiber-optic technology developed and manufactured by Ortel Corp. in the San Gabriel Valley.
But the story doesn’t end there.
Fast-growing Ortel recently entered the red-hot wireless phone market with a new product, and the firm plans to introduce technology later this year that could dramatically increase the fiber-optic capacity for wired telephone networks.
Ortel has fueled its growth with an enviable combination of factors: It combines proprietary laser technology developed by California Institute of Technology graduates with a strong management team and worldwide markets that can’t get enough of its state-of-the-art products.
That mix has propelled Ortel onto the international stage over the last four years, with company revenues nearly quadrupling from $15.6 million in fiscal 1992 to $57.7 million in fiscal 1996. International sales comprise a growing piece of the pie, accounting for 34 percent of sales in 1996.
Earnings have trended upwards over the last eight quarters, with an unusually strong quarter in the latest reporting period for the three months ended Oct. 31.
Ortel reported net income for the quarter of $2.1 million, compared with $1.6 million for the like period a year ago.
Nearly three-quarters of the company’s revenues still come from its original commercial product, introduced in the mid-1980s: A laser/fiber-optic assembly used in cable TV networks. That kind of staying power is unusual in the ever-changing telecommunications game.
The assemblies, developed by company founders and former Cal Tech researchers Israel Ury and Nadav Bar-Chiam, receive electronic cable TV signals and convert them to light signals that can be transmitted over fiber-optic lines.
Ury and Bar-Chiam started Ortel in 1981 and funded their early work with a smattering of government contracts and $5 million in private investment during the company’s early years.
It wasn’t until 1986, when Ortel entered the commercial telecommunications market, that the company’s star really began to rise, said President and Chief Executive Wim Selders, who joined Ortel in 1985.
“Our breakthrough was (developing) the technology to bring more cable channels to homes at lower cost,” said Selders. After demonstrating the technology to Time Warner, the company grew very quickly, he added.
Since the introduction of its cable product, Ortel’s workforce has grown from 20 to about 600, Selders said.
The company went public in 1994, raising $34 million in an initial public offering. The stock has appreciated from its original offering price of $13 to nearly $20 as of last week.
Ortel’s big break came in 1988, when it started selling its assemblies to General Instrument, the world’s largest supplier of equipment to cable companies. The assemblies allowed the average cable company to expand its network capacity from an average of 30 channels using existing technology to 110 channels.
In addition to General Instrument, Ortel’s current customers list includes such big-name electronics firms as Antec Corp. of Illinois, Thomson-CSF of France and Philips Electronics N.V. of Holland.
But the company’s meteoric rise hasn’t been completely free of the occasional hiccup.
One setback came two years ago when legislative uncertainty in the cable industry led many cable companies to put the brakes on infrastructure upgrades.
“Ortel experienced a big business slowdown because the telecommunications act was on the table (before Congress), and no one wanted to do anything until that was done,” said Tarun Chandra, an analyst at investment firm Punk Ziegel & Knoell. Still, Chandra and other analysts said Ortel is a well-run company that is very good at exploiting its market niche.
“They’re producing a good product in a field of strong growth,” said Alvin Mirman, director of research at Commonwealth Associates. He added that Commonwealth currently has a “buy” recommendation on Ortel stock.
Ortel has begun moving into other areas of telecommunications equipment.
It paid $6.7 million about a year ago to acquire the Swedish firm Avitec, which makes equipment for wireless phone networks. Specifically, Avitec makes “signal repeaters” that allow wireless phone networks to transmit signals in areas that are usually inaccessible because of obstructions from mountains or tall buildings.
Ortel has also developed technology that will allow telephone companies to greatly increase capacity of their fiber-optic lines using a technology called “wavelength division multiplexing.”
To accommodate its new products and sales growth, Ortel has expanded from its original 6,000-square-foot space a decade ago to its current 100,000 square feet which is spread out among several buildings. The company is preparing to break ground on a new 65,000-square-foot building, which will house all its administrative and research operations. That building is slated for completion by year end.
Diversification and development of new products is a must for a company like Ortel, which spends about 15 percent of its revenues on research and development, according to Selders.
“In a high-tech industry like this, it’s a constant challenge of adjusting to market needs and staying ahead of the competition. The name of the game is growth, and there’s never a lack of a challenge.