OEC 1.47% 33.5¢ orbital corporation limited

10/07 interview with cook

  1. 262 Posts.
    Below is from a 10/7 interview


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    TWST: Can we begin with an introduction to Orbital Engine, including
    a description of your core activities?

    Mr. Cook: The Company was originally founded in the early 70's to
    develop and manufacture a novel rotary engine known as the "Orbital™
    Engine", which was essentially a more sophisticated version of the
    Wankel engine. Rotary engines, of course, have the attraction of
    improved power density over reciprocating engines, and despite all
    the technical difficulties this was worth pursuing. Like a lot of
    innovation companies, it is not necessarily always the original idea
    that proves to be the most attractive commercially, and from those
    engines Orbital developed expertise in direct gasoline injection
    technology and particularly in air-assisted or dual-fluid direct
    injection technology. The first products that incorporated the
    technology appeared on the market in 1996 on Mercury outboard engines
    under their "Optimax" trademark. Subsequently, the technology
    appeared on SeaDoo personal watercraft from Bombardier, as well as
    motor scooters from Aprilia, Piaggio and Peugeot in Europe. Tohatsu
    and Nissan outboards also utilize the technology. So that gives you a
    sense of how the company has developed.

    TWST: Can you describe the competitive landscape and how you see you
    company positioned in this space?

    Mr. Cook: We derive our revenue from three major sources. One revenue
    stream relates to royalties and licenses from the direct injection
    technology that I have just described. The second revenue stream is
    derived from contractual powertrain engineering and engine management
    services, which we provide to OEMs, particularly in the automotive
    area. And third, we enjoy some returns from Synerject; a joint
    venture company between ourselves and Siemens VDO, which produces
    amongst other products the novel air injector associated with our
    technology. To talk about the competitive landscape, I need to cover
    each of these areas. First, let's talk about the fuel injection
    portion of the business. We have innovative technology that competes
    with high-pressure direct injection technology being developed and
    starting to enter the market from companies such as Robert Bosch,
    Siemens VDO, and Delphi. There are similar competitors in the
    Japanese environment, including Hitachi, Denso and Melco, for
    example. Our technology appears to be the most advanced, having been
    in the market in one form or another since 1996. It is cost
    competitive and it seems to offer the best outcomes, both in terms of
    fuel economy and emissions compared to the competitive technology.
    However, we lack the market presence and the size of a Siemens VDO, a
    Delphi or a Robert Bosch, but ultimately the OEMs are going to be
    dependent on that level of Tier 1 supplier for large volumes,
    assuming the technology is successful. On the contractual services
    side of our business, there are a number of similar organizations to
    ours globally, that provide advanced engineering services to the
    OEM's. They include the companies like Ricardo, FEV, AVL, Lotus, and
    Porsche. The latter will be more visible to the average consumer
    because of their vehicle brands, but they do provide extended
    automotive services to other OEMs. In the contractual services area,
    there seems to be a couple of basic drivers that are encouraging OEMs
    to outsource an increasing portion of their development activity.
    Surprisingly, one of those drivers seems to be the consolidation that
    is going on in the industry. Consolidation forces the OEM to focus
    their limited resources into their brand and product marketing, less
    into product development which they can subcontract to specialist
    groups or suppliers. The second driver seems to be that the
    technology in the average automobile is becoming highly specialized
    and the skills for it are not traditionally within the automotive
    manufacturing industry itself. The electronics that are on cars these
    days, exhaust gas catalyst and exhaust gas management, for example,
    not to mention the entertainment systems, are all areas of technology
    that the car maker has not typically been involved with. The result
    is to encourage the OEM to outsource that system's development and we
    think we are taking some advantage of that, particularly in
    powertrain engineering.

    TWST: Can you give us an insight into your strategic direction and
    main objectives for the next 12 to 24 months?

    Mr. Cook: In the short term we want to consolidate the gains we have
    put in place over the last 18 months. We've got our costs under
    control and we are trying to drive ourselves as an innovation company
    into cash neutrality with some level of profit. We have essentially
    got ourselves to that stage, and we want to be able to take that
    forward. On the longer-term, it's simply a case of getting total
    revenue up and getting our technology adopted on a reasonably broad
    front. That takes time and that's the reason we have long-term goals.

    Have a nice day, Tom
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