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TWST: What is RAE Systems?
Mr. Durstenfeld: RAE Systems is a global manufacturer of toxic sensors,
radiation detectors, wireless sensor and video networks who's mission is
to provide rapidly deployable sensor networks that enable our customers
to identify safety and security threats in real time. We have three core
products. We have gas detection instruments, radiation detectors and
fixed or mobile digital video recorders. We were founded in 1991 by
Robert Chen and Peter Hsi. They are both still with the company, Robert
Chen as Chief Executive Officer and Peter Hsi as Chief Technology
Officer. In 2002, the company went public through a reverse merger with
a company called Nettaxi. So I caution investors that if you look at
pre-2002 data, what you are actually seeing is the dot-com shell that we
merged with to raise $7 million. We did a secondary offering in January
2004 and raised $32 million. We are currently traded on the AMEX as RAE.
We made our first acquisition in May 2004. We bought a company that was
a state-owned distribution company in China. This was a bold step for us
as we began to see the industrialization of China even two years ago as
a great market for us. We made our second acquisition in July of this
year. We bought a company called Aegison in the digital video recording
space. They make both mobile and digital recorders used by law
enforcement, as well as transportation and entertainment companies. Our
reason for the second acquisition is that one of the market drivers
moving us forward is the convergence of two big markets ' safety and
security. As both of them become more electronic and more data-driven,
offering products that serve both markets can be a sweet spot for us. TWST: Would you give us an idea of what the competitive landscape is
like with the products that you offer?
Mr. Durstenfeld: The competitors are interesting in that we don't have
any pure peer competitors, but we compete with divisions of some pretty
major players including Honeywell in the US. We compete in the gas
detection area with a division of Thermo Electron and a division of
Tyco. In Europe, we compete with a medical instrument company called
Draeger ' we compete with their safety group. In the US we also compete
with a company called MSA (Mine Safety Appliance) mostly in the homeland
security first responder space. So the markets that we play in are quite
broad and therefore invite a lot of competition. Markets include
everything from food processing, to public venue protection, to homeland
security, to many three-letter agencies of the government. Our business
is split about 50/50 between government and industry, so we are not
affected significantly by the cyclicality of either market. Of course,
in the industrial space, China is a huge opportunity for us. In fact, we
have seen a big shift in our business from 2004, when we were a $45.8
million company with two-thirds of our business from the Americas, to
the second quarter of this year with our Americas contribution down to
48%. The big growth is both in Europe and in Asia. In 2004, our Asian
business was a quarter of our business. By the end of 2005, it was two-
thirds. Our combined Europe and Asia business at the second quarter of
this year was 52%. We are positioned to pursue the industrial markets of
the world, predominantly in Eastern Europe and Asia, specifically in
China.
Tickers included in this excerpt: RAE
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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