DEFENSE NEWS
Israeli Firm To Expand in U.S
.By Barbara Opall-Rome
Published: 10 December 2007
TEL AVIV - ITL Optronics Ltd., an Israeli provider of laser targeting and electro-optical systems for infantry, has fixed its sights on the U.S. market, where executives here expect to generate a six- to sevenfold increase in sales over the next five years.
Through its latest U.S. acquisition and a selective portfolio of combat-proven urban warfare and specialized infantry offerings, ITL aims to expand its U.S. market share from $15 million to $100 million in the next five years, company President Eli Venezia said.
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"Our strategy calls for institutionalizing our presence in the U.S. market," said Venezia, estimating that U.S. government orders will ultimately account for 30 percent to 40 percent of sales.
"We believe these projections are reasonable and attainable," he said. "They realistically reflect our ability to match mature Israeli technologies and our unique operational concepts with steadily increasing demands of the U.S. market."
By the end of January, Venezia said, he expected the closing of ITL''s 72 percent acquisition of Fraser-Volpe, a Warminster, Pa., firm specializing in gyro-stabilized electro-optical gear. The estimated $7 million deal has been approved by U.S. government authorities.
In parallel, Venezia said, ITL aims to sustain double-digit growth through enhanced sales and new innovations for soldiers that are now in advanced development or field testing with its principal customer, the Israel Defense Forces (IDF).
Part of the Mikal Group, Israel''s second-largest non-state-owned defense firm, ITL is a key provider of laser aiming devices, night-vision gear, target acquisition systems and C4I gear for infantry, border control and anti-terror forces. Along with Fraser-Volpe, ITL has full or controlling equity in five firms: three in Israel, one in the United States and one in Bangalore, India.
Traded on the Tel Aviv Stock Exchange, ITL''s stock peaked in 2005, when it reached29 shekels ($7.53) per share and sales reached $31.5 million.
But the following year, sales plummeted to $20.8 million and ITL''s stock traded at an all-time low of $1.52 per share, a downturn that executives and analysts attributed to excessive spending and failure to win at least two critical overseas competitions.
To arrest the downturn, Miko Gilat, co-owner and chief executive of the Mikal Group, fired several top ITL managers and recruited Venezia, a respected executive from Elbit Systems.
Since joining ITL in early 2006, Venezia has instituted managerial reforms, a disciplined spending regime and a more realistic development strategy that is restoring confidence in the local market, industry executives and analysts here said.
"The company still doesn''t enjoy the full confidence of the local market, but it is showing significant promise as performance improves," said Ella Fried, an analyst at Prisma Finance, a local asset management firm. Fried said Venezia and ITL''s new chief financial officer, Shahar Armon, are well-regarded in the industry, as are some of the firm''s high-quality electro-optics technologies.
Nevertheless, Fried said that ITL - like other small, niche firms whose bottom line depends on specific program wins - remains vulnerable to market volatility, and must operate with major prime contractors to assure growth. ITL''s new U.S. acquisition has the potential to insulate it from competitive turbulence and improve its market value if it provides a platform for ties with a prime contractor, she said.
Venezia said he expected a turnaround for ITL in 2008, which will allow it to acquire "a significant company in Europe" in 2009.
Meanwhile, ITL''s latest acquisition will continue to operate as a U.S.-managed firm under the Fraser-Volpe name so as not to jeopardize security clearances. "That means I and other Israeli executives will have no access to classified American data, there will be no business with China and the firm will abide by all U.S. government restrictions," said Venezia, who will serve as vice chairman of the new holding.
ITL will consolidate its U.S. electro-optical production at Fraser-Volpe, but will retain a managerial staff in Emerson, N.J. ¡
E-mail: bopallrome@ defensenews.com.
