FLIR Covers Additional Spectrum

June 23, 2009

FLIR Systems Robust announced last week that it had acquired Salvador Imaging, maker of visible and low-light imaging systems, for $13 million in cash.  The charge coupled detector (CCD) technology developed by Salvador features an electron multiplying effect which acts as a preamplifier to the detected signal, enabling low light operation.  Salvador’s cameras are characterized by full-color, high resolution images.

Salvador’s founder, David Gardner, is something of a serial entrepreneur in the camera business.  He founded Silicon Mountain Design, which he sold to Dalsa in 1999 for $11.5 million.  Later, using seed money from Photon Dynamics (PD, now part of Orbotech), he founded Summit Imaging (sold to PD in 2003 for $1.7 million) and with $800,000 from PD, founded Salvador.  In 2007 PD purchased Salvador for $19.5 million, which was then purchased back by Gardner last fall.

We see FLIR’s recent action as further evidence of the strong market for image-based sensing equipment.  Although CCDs operate outside of the infrared (IR) spectrum, FLIR has stated that it often develops camera systems in the visible band, particularly for low-light applications.

Each segment of the electromagnetic spectrum has unique capabilities that make it useful to a comprehensive security surveillance system.  The purchase of Salvador, to be re-named FLIR Advanced Imaging Systems, enhances FLIR’s ability to provide a greater portion of each multisensory system demanded by its government customers.

2 Comments | Technologies, Thinking About M&A?, Topics on Our Mind, Transaction News, Uncategorized | Permalink
Posted by Peter Yu ptyu@gtadvisors.com

Sound Lasers Might Be Music to Optical Component Ears

June 17, 2009

Monday, Colin Barras at New Scientist published an article describing progress towards a “sound laser” able to emit a narrow beam coherent terahertz-frequency sound.  We would like to focus attention on this progress as an example of a classic “enabling” technology that could really spur new applications or help accelerate the emerging commercial applications for terahertz devices in security, imaging and spectroscopy.  The prospects are very bright for terahertz systems because they utilize a part of the optical spectrum below infra-red (longer wavelength, lower energy), that lets images pass through walls or clothes, is sensitive to plastics, and is safer than X-rays because it does not emit ionizing radiation.

There is already a rapidly-growing ecosystem of companies seeking to further commercialization of terahertz devices.  These companies range from the public Picometrix (part of API) to several emerging privates including TeraView, Zomega Terahertz Corp. and ThruVision.   We also see another dozen or so companies that have begun to leverage their existing optical capablities to become suppliers or system suppliers; we think this will become one of the important non-telecom markets over the next few years.

Leave a Comment » | Technologies | Tagged: , , | Permalink
Posted by Dennis Gallagher dgallagher@gtadvisors.com

Seeing with Different Eyes: Millimeter Wave Scanning

June 11, 2009

Scanning systems that can detect potential threats remain a focus of the security industry.  We noted in our ASIS summary last fall that X-ray systems, used in examining baggage and cargo, continued to see strong demand.  Although proven effective in these applications, X-rays are not suitable for people because of concerns over radiation exposure, particularly for children and frequent travelers.  Thus, preliminary scanning of large crowds of people is typically carried out using metal detectors and visual inspection or profiling, which suffer drawbacks from limited detection and privacy and civil rights concerns.

Several companies have offered millimeter wave imaging as a safe, speedy alternative to metal detectors for preliminary screening.  Using electromagnetic spectrum in the 30 to 200 GHz band, L3 Communications has developed a system, the ProVision Whole Body Imager (priced at about $170,000), that can process as many as 400 people per hour and identify objects such as liquids, composites, ceramics, gels, plastics and drugs in addition to traditional metallic weapons.  ProVision scanners are active, meaning that they illuminate subjects with millimeter waves and detect reflected energy, and have been deployed on a test basis at a number of airports including Denver, Los Angeles, Miami, Ronald Reagan Washington National and San Francisco.

(Image sources: Millivision and TSA) 

Several companies, including Brijot Imaging Systems and Millivision Technologies, offer passive imaging systems that use naturally-emitted millimeter waves to detect metallic and non-metallic threats, without requiring illumination.  Passive systems are being used in a pilot program at selected Port Authority of New York & New Jersey PATH stations starting on Wednesday, June 10, 2009.

Both active and passive millimeter wave imagers can see through clothing and offer enough detail to trouble privacy advocates, who liken them to “electronic strip searches.”  We think this potential drawback can be overcome.  Indeed, suppliers of millimeter wave screening systems work around the privacy problem by using software, which blurs or obscures images in sensitive areas, and protocols, which do not store images and place viewers remotely from subjects of the scanning.

Because they detect a broader range of objects and have high throughput, we think that millimeter wave technology will prove to be an important tool for scanning people in crowded public venues such as airports, ship terminals, train stations, municipal buildings, auditoriums, theaters and stadiums.

3 Comments | Technologies | Tagged: , | Permalink
Posted by Peter Yu ptyu@gtadvisors.com

Tunable photonics based on graphene

June 10, 2009

Jon Cartwright, at RSC Chemistry World has a first-rate article today summarizing lab results demonstrating tunable photonic characteristics in graphene (‘Bilayer’ graphene shows tunable bandgap).  The results appear very far from commercialization, but should pique the interest of any company that works on wavelength selective switches and optical channel monitors that can utilize tunable optical filters.  We wrote earlier about the exciting potential in applications of graphene; tunable filters are the kind of application we believe graphene could excel at because it should easily couple with compound semiconductor devices, such as photodetectors.  Other applications that leap to mind include IR sensing and imaging.  This short article is well worth a read.

Leave a Comment » | Technologies | Tagged: , , , , | Permalink
Posted by Dennis Gallagher dgallagher@gtadvisors.com

The Other Side of the Fiber Laser Equation

June 9, 2009

Yesterday, a number of industry websites pointed out that Bayer Materials Science (partnering with Alcan) had an interesting announcement about using carbon nanotubes, to create ceramic-metal composites with aluminum.  This is pretty exciting progress towards practical applications of nanomaterials.  Improved properties include hardness, tensile strength, thermal conductivity and weight.

The commercial impact of this new material is hard for us to assess because the high-volume structural applications of aluminum, such as cars, has long been hampered less by its attractiveness as a lightweight material, but more by the difficulty in welding materials into complex shapes.  An improved composite material like this might prove to aid welding because better thermal conductivity and improved tensile strength may reduce cracking during welding.  This could open the door for the acceleration of fiber lasers in industrial welding – the higher power density and minimized heat help to reduce distortion of welds.  When we think about progress like this, we wonder if improved alloys such as this will be key to the next big leg up in the growth and evolution of fiber lasers.

The growth of fiber lasers has been impressive over the past few years, but broader adoption across larger industries still has hurdles.  Most in the industry are focused on upping power, finer beam control, refining processing and the the use of pulses.  What this kind of news highlights is the fact that the other side of the development equation; materials, applications and design are not static and they too can accelerate fiber laser development.

Private companies that we think will have a big impact in this area and bear watching include nLight Photonics, Alfalight and Fianium.  All of these companies will benefit from progress in materials to help make inroads into a wide range of applications.

Leave a Comment » | Technologies | Tagged: , , | Permalink
Posted by Dennis Gallagher dgallagher@gtadvisors.com

More Action on the IR Front

June 5, 2009

There continues to be significant activity in the infrared (IR) market segment.  Axsys Technologies announced yesterday that it had entered into a definitive to be acquired by General Dynamics’ Advanced Information Systems business unit.  This acquisition, valued at $54 per share ($643 million dollars in total) bolsters General Dynamics’ presence in the fast-growing intelligence surveillance and reconnaissance (ISR) market.  Although well off Axsys’s August 8, 2008 peak price of $79.69 per share, this $54 share price represents a premium of 122 percent over the company’s low of $24.35 per share, achieved on March 10, 2009, and is 22 percent above its 50 day moving average.  The transaction has been approved by the boards of directors of both parties and is expected to be completed in the third quarter of this year.

Back in March, Axsys said that it was considering a possible sale of the company, so this announcement comes as no surprise.  We think this acquisition makes sense for a number of reasons, including:

  • An Increasing Reliance on Defense Customers – U.S. Government-based defense customers have fared relatively well in the current economic downturn, something we noted in an earlier post.  Axsys’s largest customers, BAE Systems and Raytheon, are defense companies and accounted for nearly a third of Axsys’s revenues in 2008, up substantially from the previous year.  Given the growing importance of these customers, it is not surprising that Axsys would choose to be acquired by a large defense contractor.
  • Helps Axsys Play Against Much Larger Competitors – The markets Axsys competes in are populated by very large corporations.  Companies such as FLIR, L3 and large defense contractors have resources that far exceed those of Axsys; combining with General Dynamics helps to level the playing field for Axsys when it vies for contracts against these competitors.
  • Enables a Move Further Up the Food Chain – Axsys’s executive team has expressed a desire to move the business away from offering simple IR components toward more complex and higher-margin integrated systems and subsystems.  Becoming part of a larger defense contractor acquisition should provide Axsys with more opportunities to carry out this intent.

IR imaging technologies make up a fast growing, multi-billion dollar industry.  The wide applicability of these technologies spans many markets and is demonstrated through recent acquisitions made by companies focused on security, commercial and government/defense segments.  We saw significant interest in IR technology last year and Axsys’s most recent announcement shows that this momentum continues today.

Leave a Comment » | Uncategorized | Permalink
Posted by Peter Yu ptyu@gtadvisors.com

Strategic M&A Action in Optical

June 4, 2009

M&A activity is slow, but not dead.  Yesterday, Thomson Reuters had a blog post on their own data showing M&A volume at its lowest point in six years and down 40% Y/Y and transactions under $500 million, fell 48 percent.

It seems the same factors are being felt across many industries; indigestion from debt loaded capital structures, caution in the face of uncertain end-market demand and indecision about corporate strategy.  Yet there are companies working towards structural moves; thus we are seeing three types of deals get done 1) fire sales of distressed assets 2) acquisitions to pull indispensable capabilities in-house and 3) low-risk mergers of equals or asset swaps.   We view this as the starting point for increased M&A in optical components over the rest of the year.

Yesterday we saw one such move; Oclaro (the former Bookham + Avanex) agreed to swap its New Focus catalog business for Newport’s high power laser diode business plus some cash.   In our mind this affects a positive structural change at Oclaro with little risk or cost.  Oclaro’s gross margins will improve due to better loading of its compound semiconductor fabs and with the move Oclaro achieves greater marketing reach in commercial lasers.

Thus far in this quarter, there have been other examples such as:

April 3rd, Ingis ASA acquired Syntune, maker of tunable lasers for stock and assumption of debt.

April 14th, Photonera acquired Intexys Photonics, maker of terabit parallel optical modules.

Besides the financial barrier being lower for such deals, these are companies finding a way to keep moving forward, even if that means accepting stock instead of cash as a means to liquidity.  We expect the pace of this sort of transaction will accelerate as the year grinds forward.

Leave a Comment » | Thinking About M&A?, Transaction News | Tagged: , | Permalink
Posted by Dennis Gallagher dgallagher@gtadvisors.com