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Building a smarter grid – AML diversifies its defense operations

By   /   Thursday, July 2nd, 2009  /   Comments Off on Building a smarter grid – AML diversifies its defense operations

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AML Communications built a solid business over the last 20 years supplying the defense industry, but a small company it bought last year could prove a big win as the federal government pushes to make the U.S. electricity grid more efficient.

The Camarillo-based company makes microelectronics that deal with microwave signals and has turned a profit for the last six quarters. Its devices have gone into unmanned aerial vehicles, the remotely controlled aircraft that have come to the fore in the U.S. military’s recent campaigns in Afghanistan and elsewhere.

But AML, which has about 95 employees at its 25,000-square-foot facility, has also recently jumped in another burgeoning sector – smart electric grids. Last year, it acquired Mica-Tech, a small company that is building a system that lets utilities communicate via satellite with their distribution stations.

Right now, the grid is “highly un-automated,” said Jacob Inbar, the chief executive of AML. When a big storm hits Southern California, thousands of trucks hit the road to manually flip switches on mountaintop distribution stations.

A slew of small dishes on the backside of AML’s building beams signals to test a system that would automate much of that work. The firm’s smart-grid technology is “just a dream now,” Inbar said, but AML saw a good opportunity with Mica-Tech.

“We paid relatively little money for Mica-Tech,” Inbar told the Business Times during an interview at AML’s headquarters. “We’ve straightened it out. I laid off half of the company, unfortunately, so that the rest could survive.”

Though utilities have some satellite communications built into distribution systems already, AML is working on a newer generation with more capabilities. The old systems are so archaic that some still use DOS – an operating system that’s been outdated for at least a decade.

“The utilities that we deal with are in a different class than businesses that make a profit,” Inbar said. “It takes them longer to react.”

But smart-grid efforts make up only a tiny portion of the firm’s revenue. About 95 percent comes from the defense business, which Inbar calls AML’s “meat and potatoes.”

The company’s products detect, amplify and mix signals. Its assemblies go into a range of weapons and systems, including unmanned aerial vehicles.

“[Unmanned aerial vehicles] are very popular because they save lives,” Inbar said. “They’re marvelous at reconnaissance. They’re marvelous at surveillance. They’ll jam the enemy before they even know what him them.”

Those vehicles have come under scrutiny for civilian causalities during U.S. military attacks in Pakistan recently, but they remain one of the fastest-growing segments of the defense market. In a study, the Washington, D.C.-based research firm Teal Group predicted that worldwide spending on the market will go from its current $3.4 billion each year to $7.3 billion within ten years, totaling nearly $55 billion in the next decade.

“The most significant catalyst to this market has been the enormous growth of interest in [unmanned aerial vehicles] by the U.S. military, tied to the general trend toward information warfare and net-centric systems,” Steve Zaloga, one of the authors of the Teal study, said in a new release.

AML retains some tri-county customers, including Raytheon’s electronic warfare division, a major Goleta employer.

“A significant portion of our business is electronic warfare, and therefore we’ve had a long-term relationship with the Raytheon electronic warfare division in Goleta,” Inbar said. “It’s one of our biggest customers. Raytheon remains our crown jewel.”

AML has racked up some operating losses over the past two years as it’s invested in infrastructure and researching new products. But it has continued to eke out profits – just under $1 million this year, and a little more than $2 million the year before. Earlier this year it booked a record number of customers.

As many small companies go private because the compliance costs of being public are too high, Inbar says it hasn’t been a problem for AML to trade on the Over-the-Counter Bulletin Board, where its shares go for about 70 cents these days, down from about $1.20 a year ago.

“The cost to be public is not prohibitive,” Inbar said. “It’s a little bit of a hassle sometimes, but we manage it rather well.”

AML’s biggest problem at the moment might be keeping up with demand.

Scott King oversees production at AML. He said he’s been searching to find good employees – most need five or more years experience. Even the temporary workers the company hires to meet big production runs need a high skill level.

“When you’re dealing with the specific assemblies we build, you can’t just put it in a machine, press a button and have it spit it out,” King said. “Even in an economy like this one, where people are looking for jobs, it’s difficult to find qualified people.”

AML is making hires and is testing out a new production shift, King said.

“We’re running overtime,” King said. “We’ve been very busy, which is a good problem to have.”

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