Falling Back on Defense : Thermo Electron Planning Conversion From Military to Commercial Products

Before being declassified during 1991, the high-tech optical devices that Thermo Electron Technologies Corp. is developing for the Defense Department had a single proposed use: giving earthbound observers a peek at Soviet satellites in orbit around Earth.

But, with declassification, San Diego-based Thermo Electron Technologies began working with astronomers to incorporate the devices into research telescopes that focus on distant planets and stars rather than gathering intelligence on potentially hostile satellites.

The optical systems, which use a high-tech blend of computer-controlled mirrors and a laser beam, are able to compensate for atmospheric disturbances that blur images captured by research telescopes.

“It is a technology that holds great, great promise,” said Roger Angel, an award-winning astronomer at the University of Arizona’s Steward Observatory, which is studying an optical array system donated by Thermo Electron Technologies.

The commercial market for the high-tech optical devices is limited to a handful of larger research observatories. But Thermo Electron Technologies also intends to use the system’s decidedly quick parallel processor to drive an ultra-wide band radar system that could give radar operators the ability to distinguish among aircraft models.

Finding commercial applications for technologies with military heritages is the corporate game plan at Thermo Electron Technologies.

Thermo Electron Technologies is turning a profit from its military research. The company reported $370,000 in net income and $16.8 million in revenue, nearly all of which came from military contracts, for the year ended Dec. 28, 1991. A significant portion of the contracts were for “non-traditional imaging systems” for use in spotting satellites in space or ground-based targets that are obscured by clouds or fog.

But, in an era of defense cuts, Thermo Electron Technologies executives believe that the company’s profitability will depend on its ability to convert know-how gained through military contracts and related proprietary technology into commercial products.

The company, with 155 San Diego-based employees, completed its initial public offering in July, 1991, after being spun off by Thermo Electron Corp., its Waltham, Mass.-based parent company that owns 70% of the local subsidiary’s stock. Thermo Electron has sold similar minority interests in seven other publicly held subsidiaries, each of which is pursuing commercial applications for proprietary technology.

The parent company spins off its smaller operations with the expectation that “they will be entrepreneurial companies . . . (where managers) become partners in success, so they put their heart and soul into it,” said Firooz Rufeh, president of Thermo Electron Technologies.

Some high-technology industry analysts are impressed with the company’s core technologies.

“Thermo Electron Technologies represents a rare opportunity for public market investors to participate directly in the development of products with very large market potentials,” said Barry McCurdy, a Dallas-based industry analyst with William K. Woodruff & Co.

McCurdy, who cautioned that it will be at least two years before any commercial products are ready for market, is particularly impressed with two avionics products that Thermo Electron Technologies is developing.

One avionics system under development would allow commercial and military pilots to spot potentially lethal “microbursts,” or wind shears, that can down even the largest passenger airliners as they take off or land.

The wind-shear device is an offshoot of research into a technology that would allow soldiers in the field to spot enemy helicopters hidden behind hills or other obstructions. Tests at the company’s San Diego office suggest that the technology can, indeed, locate and identify distinctive wind patterns created by rapidly moving helicopter blades.

Thermo Electron Technologies executives believe that the technology could help airline pilots avoid deadly wind shears like the one that caused a Delta airplane to crash at Dallas-Fort Worth airport in 1985.

The second avionics product under development is a “passive microwave camera” that commercial airline pilots would use to locate airfields at night or when runways are obscured by fog or clouds.

The camera would record microwave radiation emitted from the ground, runways, aircraft and vehicles. Microwave readings would be transformed into real-time images for display in cockpits. The technology originally was developed to allow military aircraft crews to spot targets that remain hidden by fog or clouds.

Although Thermo Electron Technologies hopes to have prototypes of its two avionics products ready by 1994, it will take at least a year longer to perfect a medical imaging system prototype capable of generating high-resolution, three-dimensional video images.

Company officials described the technology as “augmenting” more-expensive Magnetic Resonance Imaging, or MRI, devices. The imaging system would be used for early detection of abdominal cancers and breast tumors.

As is the case with the avionics products, the medical imaging system is the offshoot of a military technology. “The original idea was based on a technology that would allow observation of space objects,” said Kenneth Y. Tang, senior vice president of Thermo Electron Technologies.

Although the military application involved the use of lasers to target distant objects, the company soon learned that sound waves were better suited for medical imaging applications, Tang said, adding, “But once again, it was a technology with a military base.”