GSI Group sells laser systems biz, aims for higher-growth markets

Bedford, MA -GSI Group (NASDAQ: GSIG) reported slowing business in 3Q12, and also revealed it has finally sold off its laser systems business.

A year ago GSI Group announced its intentions to slough off its "laser systems" business, specifically the Control Laser/Baublys and Control Systemation lines. Those areas contributed around $60M-$65M in sales in 2011 but without the profitability of the company's other businesses. This summer that collective "laser systems business" was reclassified as a discontinued operation, amid a broader restructuring which included a rebranding of GSI Group's laser division as JK Lasers.

In its 3Q12 financial results statement, GSI Group revealed that those discontinued operations have been sold (as of Oct. 29) to Han's Laser Technology for $7 million in cash. The Laser Systems Facility in Orlando, FL is not part of the deal, however; GSI says it is trying to sell that site in a separate transaction, valued at $6M.

"We are very pleased to announce the completion of our divestiture of the Laser Systems business line," stated John Roush, CEO of GSI Group. "This is another step in our ongoing transformation of GSI to focus on precision components in higher growth markets, with an emphasis on medical applications."

During the quarter GSI took other steps to consolidate operations: closing an optics production site in California, completed consolidation of German operations, and began moving its laser scanner business into the Bedford, MA headquarters. The company is still actively trying to sell its semiconductor systems business. That unit, also classified as discontinued as of 2Q12, includes its semiconductor capital equipment for DRAM repair and circuit trimming; the company says it expects to complete a sale by the end of 2Q13. [Ed. note: revised 11/9 to clarify what is, and is not, part of GSIG's semiconductor unit.]

Also during 3Q12, GSI Group initiated a program to identify some $1M-$2M in areas of cost savings to address "the continued uncertainty and volatility of the macroeconomic environment." Those efforts resulted in $1.7M in severance in 3Q12 -- nearly a third of that ($500K) tied to David Clarke, former head of the laser products group (and longtime president of Synrad) who left the company in September though perhaps with future partnership opportunities.

The company's 3Q12 numbers reflected that ongoing macroeconomic softness in what CEO John Roush characterized as "a weak market for capital equipment." Sales were down about -1% from 2Q12 and -12% from 3Q11. Net income from continuing operations fell to $2M, down from $4.4M in the prior quarter and $7.3M a year ago.

GSI continues to see strength in some areas of its business, though -- fiber laser sales more than quadrupled year on year thanks to its new kW-class offering, and the laser scanning product line achieved 23% Y/Y growth. The company also continues to make "strong progress in cultivating potential acquisitions," and is pursuing its focus on precision components in higher-growth markets, with an emphasis on medical components and applications, according to Roush.