Ortel: Tripping the Light Fantastic

On the wall above professor Amnon Yariv’s well-ordered desk at Caltech is a picture of himself bodysurfing a 10-foot wave in Hawaii 15 years ago.

Surfing has been a passion since Yariv was a boy of 6 in his native Israel, although the biggest waves he has caught in his life have nothing to do with water.

Yariv is one of three co-founders of Ortel Corp., the Alhambra maker of advanced semiconductor lasers that on Monday announced an agreement with Lucent Technologies to be bought for $2.95 billion.

“Defense work is what nourished us in the beginning,” said Yariv, a scholarly, 69-year-old professor of applied physics. “What changed everything was the Internet.”

In the company’s formative years in the early 1980s, Ortel caught the great defense wave that built Southern California into an economic and technological powerhouse. In the late 1980s, Ortel rode through rough waters when the defense industry began shrinking and the demand for the company’s advanced communications lasers began to wane.

But it survived those times to finally catch the rolling wave of the Internet--a consumer revolution that reshaped old defense contractors into cutting-edge darlings of Wall Street.

Now, with Lucent’s proposed purchase of Ortel, Yariv and his former students Nadav Bar-Chaim, now 53, and Israel Ury, 43, became instant multimillionaires.

Bar-Chaim, now the company’s senior vice president in charge of strategy and planning, said he never imagined that the company he helped start nearly 20 years ago would eventually be sold for such a princely sum.

The coming of age of the once-exotic laser technology that launched Ortel was evidenced by Yariv’s founding of yet another laser-related company on the same day as the Lucent announcement.

His new company, Orbits, will design a new generation of advanced lasers--this time not built out of semiconductor chips, but out of the same glass fibers that make up fiber-optic networks.

In the time frame of physics, in which ideas can take generations to work themselves into the marketplace, the development of lasers--a device that produces a highly ordered beam of light that is of the same wavelength--has been surprisingly fast.

The first gas laser was made in 1960. “Most people had no idea what you would do with them,” Yariv said. “There were all sorts of ideas--death rays, surveying, medical application--but there was no killer application.”

What changed the situation was the development of lasers that could be made out of semiconductor material in much the same way that computer chips are made. The devices became cheaper, smaller and, most important, much faster.

The next piece of the puzzle to fall into place was the invention in 1970 of optical fibers, which now allowed laser light to be transmitted over long distances.

Yariv’s specialty at Caltech was semiconductor lasers. In the ‘70s, he had a group of students working on making lasers that could send pulses of light at high speeds.

One of the most difficult parts of the process was just making the lasers, which had to be grown like crystals, but also etched like computer chips. “Even today, making them is an art,” Yariv said. “Nadav became a virtuoso.”

Bar-Chaim had studied optics in Israel, but knew nothing about lasers when he arrived at Caltech in 1979.

But before long, Bar-Chaim, Ury and another student were able to produce a semiconductor laser that could pulse 10 billion times a second.

“We found ourselves in possession of the quickest and best laser in the world,” Yariv said.

In 1980, Bar-Chaim’s time at Caltech was coming to an end and Ury was also about to graduate. To continue the development of their laser, the Defense Advanced Research Project Agency, the research arm of the Defense Department, encouraged the Caltech group to form a company.

Yariv named the company Ortel, “Or” from the Hebrew word for “light” and “tel” for both the Hebrew word for “hill” and the Greek word for “distance.”

For the next 10 years, Ortel grew at a slow but steady pace, selling lasers that could be used to transmit radar signals and other high-speed transmissions to remote locations. The company had revenue of $4 million to $5 million each year, Bar-Chaim said. “Military work doesn’t grow very fast, but it pays the bills,” he said.

But when the Berlin Wall came down in 1989, Bar-Chaim said that although the company was doing fine, they could see that the days of steady defense work were beginning to wane.

“We had to figure out how we could do something commercial,” Bar-Chaim said. “You read the newspaper and watched TV and you knew you had to be more aggressive.”

Their salvation came with cable television, which could transmit far more information using optical fiber instead of copper coaxial cables.

The company began soaring as it moved away from military work, but again got caught in the late 1990s as the cable companies began slowing their investment in high-cost fiber-optic networks.

The company’s revenue dropped from $82 million in fiscal 1997 to $72 million in 1999, while Ortel’s net loss in its last fiscal year was $6 million--versus a profit of $8.3 million in 1997.

The company searched for new markets, even getting into the wireless business for a while as it tried to plot a new course.

But Ortel was well positioned to catch a ride on the market frenzy for fiber-optic companies last year. Its stock soared from about $6 last year to close at $157.42 on Tuesday.

In its latest report for the quarter ended in October 1999, the company returned to profitability with income of $253,000.

To offer high-speed Internet access, cable companies had to begin shifting to fiber optics, which have more capacity to carry information and are largely immune to interference--a key element in transforming one-way networks, such as cable, into two-way networks in which users can both send and receive information.

“All of a sudden, the ceiling on growth was lifted,” Yariv said. “It’s out of sight now.”

Yariv says that, with Lucent’s manufacturing power, the company is poised to expand its laser technology into an even faster-growing market--lasers for optical telecommunications networks.

As he looks back on Ortel’s history, he says, the best thing that could have happened to the company was the fading of defense work, forcing them to look into the commercial world.

“I’ve always thought that the presence of the defense industry was a negative factor on the American economy,” he said. “The transition was traumatic, but the net result is that the economy is more robust and more agile.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

On the Beam

Obscure Ortel Corp. charged into the news this week when Lucent Technologies agreed to acquire it for $3 billion.

Company at a Glance

* Manufactures high-quality lasers, digital receivers and other equipment used for high-speed data and cable television networks. The company’s lasers increase the speed of transmission in fiber-optic networks.

* Founded in 1980 by Caltech physics professor Amnon Yariv and two students, Nadav Bar-Chaim and Israel Ury.

* Competitors include Alcatel, Qualcomm,

Nortel Networks

Sources: Company reports, Bloomberg News

Researched by NONA YATES / Los Angeles Times