When Technology Isn’t Enough : Robotics Company Big on Know-How, Short on Profits
Technology is nice, but profits are nicer. That’s a sad fact of life for Photo Acoustic Technology, a small public company in Newbury Park that makes quality-control and robotics equipment.
Like many other companies with big ideas and little experience, Photo Acoustic Technology, or PAT, is having trouble translating nifty know-how into earnings. The company remains relatively unknown and it acknowledges that its marketing hasn’t been effective enough.
Although engineers invariably are impressed with the products, purchasing departments either aren’t convinced, or don’t understand why the engineers might want them, according to Arvind Arora, 32, PAT’s founder and president.
“We have to educate our customers,” he said. “People get so used to their own methods, it’s hard to get them to look at something new.”
Nevertheless, PAT has been able to sell its wares to research heavyweights such as Hughes Aircraft, Control Data and AT&T; Bell Labs. But, so far, sales mostly have come one by one to engineers who want to see if the products really work.
PAT makes a surface-quality monitor, a box-like device that uses a separate, pen-shaped ultraviolet-light sensor to find contamination and defects on surfaces such as semiconductor boards or aircraft panels.
Software Program
The company also makes a computer software program called PATSCAN that can accompany the system, producing three-dimensional images of the surfaces being examined.
Surface cleanliness is important to industries for a variety of reasons. A greasy spot can keep two steel satellite panels from bonding. A fleck of dust can cause a computer’s disk drive to make errors while reading information.
The company has developed another product scheduled for release in December--an acoustic robot-vision system that can guide a mechanical wrist and hand along a surface at a fixed distance, using ultrasonic waves. Such a device could be used for painting and welding, or, in a complete PAT system, for moving a surface-quality monitor.
Arora left Rockwell International in 1983 to start his company. At Rockwell, he was a project manager in a fracture mechanics department, which studies cracks and dislocations in materials.
Arora said he hopes PAT will eventually secure a niche providing defense and aerospace firms with automated quality-control systems. Such systems could incorporate the surface-quality monitor, the robot-vision unit and PATSCAN.
But, in the meantime, PAT has been selling its products slowly. Since opening for business in September, 1983, the company has sold 19 of its surface-quality monitors for $15,000 to $25,000 each, Arora said. It has also sold three PATSCAN programs for about $2,000, he said.
Seed Money Not Enough
By February, 1984, PAT had raised $240,000 in seed money from private investors, Arora said. But that was not enough to get the company going, so he sought out underwriters for a public offering. The offering--12.5 million units at 10 cents each--was completed in August, 1984.
Outside shareholders purchased 22% of the company. PAT’s principals--Arora, and vice presidents Majid Amini and Mantosh Chawla each were left with 17.4%, and retained the controlling interest.
Arora predicts the company will start turning a profit sometime next year. For its fiscal year ended Jan. 31, PAT lost $421,059 on $119,999 in sales. During its last quarter ended July 31, PAT lost $263,466 on $58,086 in sales. The company lost $111,890 and had no sales during last year’s corresponding period.
“A couple of good contracts, and they could be in good shape,” said Paul Galant, a vice president for Apple Financial Corp., a New York brokerage. “But I’m not recommending this stock until they get some.” The stock closed Monday at a bid price of 6 cents a share.
“The company is in a good position to be really big--someday,” said John Figliolini, who trades PAT’s stock for Jerold Securities in Clark, N.J. Until someone starts buying PAT’s products in quantity, the company will find it difficult to start an aggressive marketing campaign or introduce more new products, he said.
Although the company’s financial performance has been poor, customers praise the products. Demetrio J. Yniguez, director of non-destructive testing for Hughes Aircraft’s Design Integration Laboratory in El Segundo, said PAT’s surface-quality monitor is the most efficient device available for examining surfaces of satellite panels before bonding.
The sensor beams an ultraviolet light onto a surface, exciting electrons and scattering them. The emitted electrons are then collected and measured, so that the contaminants can be tracked by the monitor.
During production, the Hughes division uses the standard industry method to find contaminants, called the “water break-free test.” The simple test involves pouring water over metal parts. Where the water beads, engineers look for impurities.
“The satellite industry is incredibly sophisticated, but our surface-quality testing is out of the Stone Ages,” Yniguez said. “The PAT unit catches contamination beneath the surface and the water test can’t do that.”
At the Control Data Corp. in Omaha, a surface-quality monitor is used to test the thickness of lubricating coatings the company puts on the hard computer disks it makes. “It’s very useful,” manufacturing engineer Elena Haykin said. “It gives us 100% accuracy.”
3 PAT Monitors on Order
Quality control for hard disks has traditionally involved cutting squares out of sample units and testing them in a laboratory. But Control Data wants to examine every disk, Haykin said, so three more PAT surface-quality monitors are on order. Eventually, they will be installed on the production line, she said.
Arora said AT&T; Bell Labs in Columbus, Ohio, is testing the surface-quality monitor for its production processes. The monitors may be used for examining telephone and electrical connectors for cleanliness, he said.
Arora has been marketing the product himself, flying to cities such as Columbus and Omaha to show engineers its abilities. “It’s hard to justify the trips on a $15,000 purchase,” Arora said. “But the potential payoff of just Control Data buying the product for all its locations could make us a success.”
The company employs only 10 people now, and half are part-timers. PAT subcontracts all its manufacturing, only doing final assembly itself. Parts, such as circuit boards and controls, are made to PAT’s specifications by subcontractors.
Smith Credited as Inventor
Credit for inventing the surface-quality monitor goes to Tennyson Smith, a former Rockwell scientist who is now retired and living in Utah. Smith is a shareholder in the company, and sold the ownership of the technology to PAT in 1983 in return for $40,000 and 5% of the product’s gross sales up to $1 million, according to the company’s prospectus.
Arora developed the PATSCAN software and invented the company’s latest product, acoustic robot-vision. That product, however, is not as novel as the surface-quality monitor.
Other companies make Robot-vision systems using technology ranging from sophisticated laser systems that “see” in three-dimensions to video cameras that transfer images to electronic signals.
Key Image Systems of Chatsworth, for example, makes robot-vision systems with video cameras that read serial numbers from currency, travelers checks and documents.
Although Arora received an award from Research and Development magazine last month in Chicago for innovation in the robot-vision product he invented, other companies are developing similar robot-vision products based on ultrasonic waves.
Field Harder to Enter
An industry analyst said the robotics field is hard to enter. “More than 100 companies are already fighting for a market that’s no bigger than $135 million a year,” said Laura Conigliaro, who follows robotics for Prudential-Bache in New York.
Nevertheless, Arora predicted that his complete robot-vision and surface-quality monitor system will gain a foothold in the defense and aerospace industries within several years.
“The future of our business is in heavy industry because Japan, Taiwan and Hong Kong will never be able to take those away,” he said. “We don’t want to go through what all the disk-drive companies had to.”
