Friday, November 11, 2011

GSI Group weighs future of laser, semiconductor businesses

By Lori Valigra, Mass High Tech correspondent

GSI Group Inc. (Nasdaq: GSIG) reported higher revenue and reduced debt for the third quarter Thursday, but the Bedford maker of precision motion control and other devices said it intends to exit certain laser systems businesses and put its semiconductor systems business under strategic review.

After conducting a strategic review of its laser systems business lines, which are sold under the Control Laser and Baublys brand names, GSI said it is exploring options for exiting these businesses and will provide an update when it releases year-end earnings.

“While these business lines represent strong franchises within their respective areas of focus, we believe they need to achieve significantly greater scale to be successful in the long term,” John Roush, the company’s CEO, said in a statement. “However, we believe our resources are better allocated to growing our core component and subsystem franchises.” The three business lines in aggregate are expected to contribute $60 million to $65 million of revenue in 2011, but with operating profitability well below the company’s other business lines.

GSI exited Chapter 11 in July 2010 and in October 2011 entered into a new $80 million credit agreement to refinance debt.

For the third quarter ended Sept. 30, 2011, the company reported revenue of $93.3 million, up 2 percent over the year-ago quarter, and erased $22.5 million in net debt. The laser products segment was up 18 percent compared to last year, but precision motion and technologies and semiconductor systems both reported sales declines related to an industry-wide slowdown in the microelectronics markets, the company said. Net income was $8.8 million, up from $0.1 million in the third quarter of 2010.

“Our businesses continue to show significant progress, and we were able to deliver solid results in Q3 despite difficult economic conditions, particularly in the microelectronics markets,” Roush said, “We expect 2012 to be a year of continued revenue and profit growth for GSI, though we may see some demand weakness in the early part of the year in the microelectronics sector.”

Cash and cash equivalents at Sept. 30 were $50.7 million versus $56.8 million as of Dec. 31, 2010.

At the end of the second quarter of 2011, GSI outlined a growth focus on three strategic areas: scanning solutions, fiber lasers, and medical components. During the third quarter, GSI said it made meaningful progress in all three areas, and it shipped its first 1 kilowatt fiber laser into the Chinese market.

GSI in the fourth quarter plans to initiate a 12-month program called 12x12 that is targeting as much as $5 million in annualized cost savings with a goal of eliminating up to 12 facilities, including those in manufacturing, R&D and sales. This is to be achieved by site consolidations and divestitures. Further details of that program also are to be announced with the year-end earnings release, including any related restructuring costs.