Valor systems now set the world standard
By Galit Yemini
Executives at Valor Computerized Systems had a few
good reasons to smile this past year. Not only did
the company succeed in making the turnaround from
losses to profits, with fourth quarter sales
continuing to grow, but a few months ago the
U.S.-based National Institute for Standards and
Technology (NIST) decided to adopt the ODB++ data
format, developed by Valor, as the world
standard.
This is a tremendous achievement
for an Israeli company. Very
soon, with the completion of
the formalization of the NIST
standards, the whole data
transfer process between the
companies that design,
manufacture and assemble
printed circuit boards (PCBs)
will be done using Valor's
format. The competition will also have to adapt
their products to this format.
This achievement is somewhat reminiscent of the
success of another Israeli company, Verisity,
whose e-verification language for checking the
planning and testing process for semiconductor
chips was declared the world standard, making
Verisity into a world leader in the
chip-testing field.
About a week ago, Valor gained a new customer,
Foxconn, the largest electronic manufacturing
services company in Taiwan. The company decided
to upgrade the systems at its manufacturing
facilities in southern China with Valor
products designed for the PCB assembly process.
Foxconn now joins Valor's other customers,
including Siemens, Toshiba, Sony, Cisco,
Lucent, Nokia, IBM, Ericsson, Samsung, Epson
and many others.
"We have stopped thinking like a startup that
accedes to the whims of every developer,"
explains Ofer Shofman, Valor's CEO since last
year, "and we have begun to run like a mature
business company that has to think about
revenues and profits."
Valor develops software tools for planning,
manufacturing and assembling PCBs. The company
was founded as a startup in 1992 and first
issued stock on the Frankfurt exchange in 2000.
At the height of the high-tech bubble, Valor
had some 250 employees. Company executives also
considered issuing stock on Nasdaq at that
time, but the bubble burst. Valor started
loosing momentum in late 2001 and issued a
severe profit warning.
Schmil Dolberg, one of Valor's founders,
resigned his post as company CEO about 18
months ago, after Valor reported first quarter
2002 losses of $1.2 million on revenues of $5
million.
Dolberg holds 11.9 percent of Valor's shares,
while the company's two other founders, Shlomo
Almog and Moshik Kovarsky, own similar
holdings. The company's largest shareholders
are the IBI Steps Fund and Arison Investments.
The remainder of the shares are held by the
employees, entrepreneur Chuck Feingold and
Shofman, who was appointed CEO after managing
the company's operations in the Far East.
Shofman instituted a number of streamlining
measures and structural changes in order to
halt the company's losses. After trimming the
payroll, Valor was left with 170 employees and
the financial vice-president was replaced by
Dan Hoz, the former CFO for Frontline, a joint
venture between Valor and Orbotech.
Valor's Internet venture, which was designed to
allow engineers from all over the world to
develop projects jointly, was closed due to
expectations of future lack of profitability.
"The process we underwent included not only the
replacement of the executives, but a change in
the work order, development methods and
marketing," explains Shofman. "We learned how
to manage a product properly; to develop what
is needed to bring in business, and not what is
comfortable for the company's workers to do.
That's the way it goes. During the bubble era
we expanded too much, we were late in
anticipating the arrival of the crash and we
absorbed the difficulties of our customers,
too. But we learned the lessons from that
period and changed the whole concept of the
company. We were forced to be much more
focused."
Disbursing dividends
Shofman's labors have begun to bear fruit. In
the past four quarters, the company has made
the turnaround from losses to profits, with
both revenues and profits growing from one
quarter to the next. Valor finished the Q2 of
2003 with revenues of $6.3 million and profits
of $766,000. The company also decided to make a
daring move that quarter and disbursed $6.6
million in annual dividends to its
shareholders.
"Beyond that, we declared a dividend of 30-50
percent of the annual net profits for each
year," says Hoz. "This will not harm the
planned growth of the company. Among other
things, we have a strong foundation of some $30
million in cash reserves."
Valor started out developing CAD (Computer
Assisted Design) products for electronic
circuit manufacturing companies. It then began
to develop software tools intended for
companies that were designing the electronic
circuits, one stage before the manufacturing.
The tools for the design stage simulate all the
manufacturing and assembly steps and are meant
to facilitate precision designing by the
engineers. At a later stage, Valor became
involved in the PCB assembly process, which is
the stage after manufacturing. Now Valor sells
a system for engineering and optimizing PCB
assembly processes. Valor is now investing its
greatest efforts in increasing its market share
in this field.
"The assembly companies are very sensitive to
profitability," says Shofman, "and correct
assembly greatly shortens the time before a PCB
appears on the market. Competition is very
aggressive because the customers are big
electronics companies. This means that if the
assembly companies see a good return on their
investment in products that will help them,
they are also willing to pay a lot of money for
such products."
This division for products for the assembly
market is the division that is still not
profitable at Valor, but Shofman is confident
that will change soon. "The main growth and
expansion in the company in the coming years
will be in this market," he says. "Both via new
developments and via acquisitions."
The fact that Valor is involved in all three
stages of PCB production - design,
manufacturing and assembly - prompted the
company to create a new product that is
designed for industrial engineers: a digital
library of components that documents all the
development, manufacturing and assembly
processes of various generations of electronic
circuits.
In addition, in the process of preparing the
PCB, the end user, which is the electronics
company, prepares a manufacturing file that
passes among the various companies - the
designers, the manufacturers and the
assemblers. This open format that was invented
by Valor, ODB++, serves as a type of uniform
language in which this manufacturing file is
written and moves from one stage to the next.
When this format was declared the standard,
Valor gained a big relative advantage in the
market.
"What it means is that the other software
companies that develop PCBs will have to
translate their software tools into our
language," explains Hoz. "Valor has various
competitors in each one of the stages of PCB
preparation."
The optimism of the recent period is reawakening
Valor executives' thoughts of registering the
company on stock exchanges other than
Germany's, and not necessarily Nasdaq. If Valor
registers on the Tel Aviv Stock Exchange, it
will be listed in the Tel Aviv 100 and Tel-Tech
indexes, which may attract more attention to
the company than it has received so far.
Shofman wants to bring annual sales up to $100
million within a few years, but prefers not to
talk about the immediate future. In the
meantime, shareholders can only hope for the
continuation of the company's current trend and
that the recovery is not a passing phase.
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