Tenacity brought success to IPG Photonics.
OXFORD - The boardroom's large glass windows look out on a heavily wooded, snow-covered landscape that might remind the company's chief executive of Russia, where he founded IPG Photonics Corp. in 1991.
After more than 20 years with the Soviet Academy of Science, where he was a senior scientist in laser material physics, Valentin P. Gapontsev flexed his entrepreneurial muscle and founded a business in Moscow to produce fiber lasers and fiber amplifiers for telecommunications. The company expanded manufacturing to Germany, Italy and Sturbridge in 1998, when it acquired certain assets of the former Galileo Corp.
By 2000, 85 percent of IPG Photonics' revenues were to the telecom industry, which went bust in 2001.
Tough years followed. IPG bought 76 acres in Oxford and built a new headquarters complex, but plans for an initial public offering were abandoned. IPG posted losses in 2001, 2002 and 2003. "We had to fight to keep the company," recalled Tim P.V. Mammen, chief financial officer.
But even in the down years, Mr. Gapontsev invested in the company and led its transformation. IPG built a semiconductor diode plant at its Oxford complex to control the cost of one of its most expensive and ubiquitous parts - diodes are used in all IPG lasers - and targeted markets outside telecom for fiber laser applications.
And it decided to make high-power fiber lasers, and encourage new uses for fiber lasers.
IPG returned to profitability in 2004 and today is booming. It employs 1,000 worldwide, including 300 in Oxford and has global customers. Sales for the nine months ended in September 2006 exceeded $100 million, up from $62.2 million in the same period of 2005. Net income was $12.6 million, up from $3.5 million. In December, the shelved IPO was resurrected, raising $171 million, including stock sold by shareholders.
Nearly three-quarters of IPG's sales are into materials processing, where there is a $2 billion market for lasers, growing at about 10 percent a year, said John W. Harmon, an analyst who follows IPG at Needham & Co. in New York. "IPG is the leading manufacturer of a laser technology that is beating market share, compared with traditional technology," he said.
IPG also sells fiber lasers and amplifiers into the communications, medical and advanced applications markets.
"The advantage of fiber lasers is that they are highly efficient, low-cost, all solid state and with very high output of power. Ultimately lasers are just energy delivery devices, so what matters is dollars per watts of energy, and that's where fiber lasers are highly competitive with other types of lasers and traditional machine tools," said Mr. Harmon.
IPG won't report end-of-year financials until March, but Mr. Harmon, who doesn't own any shares and has a "buy" rating on the stock, estimates revenues grew 46 percent in 2006. IPG has about 70 percent of the fiber laser market, he said.
IPG describes its fiber laser technology as "disruptive" because it expects its lasers to capture market share from traditional gas and crystal lasers used in materials processing and because it believes its lasers will enable new applications for lasers.
"Existing lasers are not reliable or efficient. The quality of beam is not as good... and they are not particularly user-friendly," said Mr. Mammen. Fiber lasers are highly reliable, perform better, cost less to own, are easier to use, and are lighter and smaller, he said. Applications range from cutting and welding steel in the auto industry to micromachining medical stents.
The Navy recently bought a 10-kilowatt IPG laser to explore applications it can't yet talk about.
Erika L. White, directed energy focus area manager at the Naval Surface Warfare Center in Crane, Ind., said the laser will be used in a project at Pennsylvania State University as a research tool to study its effects on different materials. The Navy is interested in evaluating a commercial, relatively inexpensive, industry-proven product.
"We haven't come across or defined all the applications of this technology for the future," she said.
Penn State is using another IPG laser in a project sponsored by the Center for Naval Shipbuilding Technology. Edward W. Reutzel, acting head of the laser processing technologies department in Penn State's Applied Research Lab, said the project includes a 7-kilowatt fiber laser to study welding applications in shipbuilding at the General Dynamics NASSCO shipyard in San Diego.
"This higher power enables you to weld thicker material more quickly," he said. "For the project I am working on, conventional welding technology for pipe with a half-inch thick wall might require three to five passes with an arc welding torch. But with the fiber laser, we are developing techniques to weld half-inch thick pipe in a single pass and at faster speeds.''
Benefits could likely include cost savings in processing time and welding materials and reduced hazardous emission, he said. And because of its smaller size and footprint, the laser could possibly be taken to the dock, instead of bringing parts into a shop.
"IPG has a unique position in the industry with high-power lasers," said Mr. Reutzel.
Contact business editor Andi Esposito by e-mail at email@example.com.
IPG Photonics Corp.
Business: Fiber lasers and amplifiers
Chief executive: Valentin P. Gapontsev
CUTLINE: Charles Bridge, manager of high-power laser applications at IPG Photonics Corp. in Oxford, demonstrates a 6-kilowatt laser cutting head mounted on an ABB six-axis robot. It slices through a 1.6-millimeter thick automotive component at a rate of 20 meters per minute.
PHOTOG: T&G Staff/PAUL KAPTEYN
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|Title Annotation:||BUSINESS REVIEW|
|Publication:||Telegram & Gazette (Worcester, MA)|
|Date:||Feb 23, 2007|
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