RAE Systems refocuses, cuts costs
RAE Systems develops good chemical and radiation detectors for industry and homeland security; it tried its hand in the DVR market, and did not enjoy much success; now it is going back to what it is good at
Here is a case of a company straying from its core competencies, finding that it does not pay, and deciding to refocus. RAE Systems (AMEX: RAE), is a developer of multi-sensor chemical and radiation detection monitors and networks for industrial applications and homeland security. The company announced it will decrease operating expenses by reducing its work force and exiting the mobile and fixed digital video recording (DVR) markets. “We are focused on returning to profitability and sustaining it for the long-term,” said Robert Chen, president and chief executive officer. “We are concentrating our resources in our traditional sensing and safety markets and have stopped our current investment in digital video recording. However, we expect to redeploy the DVR technology as the pervasive sensing market develops.”
In the third quarter of 2007, the company expects to record an estimated $4 to $5 million charge, primarily associated with what it describes as “impairment of goodwill” and other intangible assets. The charge also includes the write-down of certain fixed assets and severance-related expenses. Except for approximately $200,000 relating to severance, substantially all of the charges are non-cash items. The company expects these actions to save approximately $1.7 million annually. The cost reduction is expected to be completed by the end of the company’s quarter ending 30 September 2007.
