ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Sunday, January 19, 1997 TAG: 9701170039
SECTION: BUSINESS PAGE: 1 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
WORKERS busied themselves at Optical Cable Corp.'s plant last week with all the little details that go into completing a major construction project - placing ceiling tiles, laying carpet and stringing huge bundles of telephone and computer wiring.
Over the past few months, the Roanoke County fiber-optic cable manufacturer has doubled the floor space in its factory and offices in the Valleypointe business park. J.M. Turner and Co. of Roanoke is the primary contractor on the 74,000-square-foot addition on Concourse Drive that fast-growing Optical Cable expects to accommodate its needs for only another three years.
Completion of the construction marks the end of a momentous year for the 13-year-old, locally founded company - an outfit that makes cable rugged enough to cross China's Yangtze River in a single 3,000-foot span.
It was a year not only of plant expansion but also of double-digit sales and profit increases; a year in which Optical Cable's owner, Robert Kopstein, managed his own first public stock sale - an event usually guided by the hands of Wall Street investment bankers. Kopstein watched as excited investors turned him for a brief time last spring into a billionaire - at least on paper.
Success of the stock sale in a market hungry for new technology issues was a mixed blessing. It provided Optical Cable the money to expand its plant. But the need to keep investors informed and to keep an eye on the stock's trading has meant more work for Kopstein. He says, for instance, that he answers 30 to 50 e-mail messages from investors a week.
Kopstein has been angered by those who have sold his company's stock short, a legal but sometimes controversial practice in which investors sell stock they don't actually own in hopes its price will later fall. If that happens they can buy stock at a lower price to cover what they sold, thus make a profit.
Kopstein said he's awaiting the results of an investigation by the Nasdaq stock exchange, which he encouraged, about whether the short selling has been done according to Nasdaq and federal securities rules.
In any case, Optical Cable faces the prospect of more memorable years ahead as people use the company's cables to tie their world together in the new Information Age.
Whether the company confronts its future as an independent or in some other form is not yet certain. Kopstein, who still owns roughly 90 percent of Optical Cable, does not rule out the possibility of a marriage with a big global partner someday. |n n| Optical Cable is one of several businesses based on the science of fiber optics that have grown up around the Roanoke Valley. The first arrived in 1973 when ITT Corp. located its Electro-Optical Products Division at an existing plant in Roanoke County.
Charles Kao, who lived here from 1974 to 1982 and was chief scientist and director of engineering at the ITT plant, wrote the first research paper explaining how optical communication through glass fibers might work.
That was at an ITT lab in London in 1966. Today, a single tiny glass fiber in a cable is capable of carrying thousands of telephone conversations simultaneously or of transferring volumes of printed information almost instantaneously
Kopstein, 47, once worked as an electrical engineer at the ITT plant, designing optical cable for the company's military customers. In 1983, he and Robert Thompson, another former ITT engineer, formed Optical Cable with the help of two local investors.
In 1989, Kopstein bought out Thompson and the others and in late 1990 moved the company's factory from Salem to Valleypointe where it can be seen by motorists traveling on Interstate 581 just north of Peters Creek Road. Its work force has grown to 140 and, with the addition of the new building, is expected to grow to about 400 before the new century, Kopstein said.
The first workers to move into the building will be the company's international sales staff and the marketing and finance departments. Initially, the building's football-field-size factory floor will be used as warehouse space for the plant's raw materials. Once all available space for equipment is used up in the original wing of the plant, equipment will be moved into the new space, Kopstein said recently.
The new office space is badly needed. Two recently hired sales managers who find business for the company in Europe and South America have been sharing space in a converted conference room in the old building.
Within the next two years, Kopstein said, the company wants to increase its international business from 30 percent to 50 percent of total sales. The company needs to hire more sales people, both those who work the phones inside the plant and those who call on customers outside.
The company plans to add as many as 10 people to the sales force of about 50 in the coming year, Kopstein said. Because international customers need more product support, the company's international sales people will require more technical knowledge and training, he said.
Manufacturing equipment will be added to the new building gradually and only as it's needed to generate profits. Planning ahead for those needs is the tricky part, said Kopstein, who sees a competitive advantage in being able to fill unexpected orders that other companies cannot.
It's the company's equipment and systems, designed in-house, that help give it a real advantage over competitors, Kopstein said.
Optical Cable, he said, will pay $70,000 for equipment that a competitor will pay $300,000 for, to do similar work. With its machinery - which he won't allow to be photographed - Kopstein said his company can do a job four to eight times faster than a competitor with a fourth to an eighth of the manpower.
As workmen finish the landscaping for the new addition, they will also landscape the remainder of Optical Cable's 22 acres at Valleypointe into a campus-like setting. Within three to four years, Kopstein predicted, the entire property should be filled with additional buildings, all looking out onto a landscaped central campus.
The final bill for the addition, including landscaping, is expected to come in around $3.5 million. The cost of equipment, when the building is full, eventually will bring the total of the new investment to $8.5 million to $10.5 million. |n n| Proceeds from the company's first public stock offering last March went, in part, to help pay for the plant's expansion.
The company originally planned a public offering in the fall of 1995 that was to be underwritten by two investment banks, but Kopstein became dissatisfied with the purchase price of shares resulting from the lead bank's marketing strategy and terminated the offering. Kopstein decided to manage the sale himself, offering to sell the stock directly to the public by advertising it in newspapers nationally.
Of 1.5 million shares that were originally offered at $10 per share, 760,000 shares were sold, raising $6.7 million after selling expenses were deducted. Kopstein retained more than 9 million shares for himself.
The stock jumped to $12 per share on April 12, the first day of Nasdaq trading, and floated within a dollar or two of that price until the first of May when it headed skyward like the space shuttle, craning the necks of the national financial media.
Partly because of the media interest and the small number of shares being traded, the stock's trading price rose as high as $136 per share in late May. Stock splits followed at the end of May and in late June. The media exposure that was related to the rapid run up in the stock's price has helped the company become known to potential customers, Kopstein said.
The price has gradually settled and the stock was trading around $11 per share last week.
Still, Optical Cable shares have provided a healthy return. Taking the splits into account, a person who put $100 into 10 shares last March has an investment worth roughly $440 today.
Last year, Kopstein said the company intended to move its stock from the Nasdaq to the New York Stock Exchange. But because of some changes in the exchanges' requirements, Optical Cable is still waiting for an invitation to join the Big Board, he said.
Kopstein said 6,000 people hold shares of Optical Cable, including 80 percent of the original buyers last year. The company's first annual report to shareholders is due Jan. 31, and its first public annual meeting will be held March 11 at Hotel Roanoke & Conference Center.
The stock continues to attract investors' interest and is the subject of ongoing discussions on Internet bulletin boards. Kopstein over the past year has issued numerous news releases on company contracts and sales projections and some have accused him of overpromoting his stock.
Kopstein, however, said he's simply been trying to educate the public about a company they don't know much about. Many investors have no idea of what Optical Cable's financial capabilities are, he said.
His stock is selling too low, Kopstein said. A price in the $20 range, based on the company's long-term growth potential, would be a fair one, he said.
Kopstein believes some of those short-selling his stock may be breaking market rules and the short-selling may have hurt the stock's price. A Nasdaq spokesman, however, said he could not confirm that the market was investigating, saying Nasdaq never comments on such matters. Kopstein said that over a fourth of the company's publicly traded shares have been sold short. |n n| Short sellers, who had hoped for a drop in Optical Cable's stock price, may have been disappointed by the company's healthy year-end earnings figures that were reported earlier this month.
Because of the buildup that's under way in global communications networks, Kopstein said he believes Optical Cable is good for more stellar performance for the next 20 years. He said Optical Cable could already have been up to three times bigger if he could have invested the $20 million he spent buying out his partners in the company instead.
Three-fourths of Optical Cable's product is a type of high-capacity "multimode" cable used to transmit data and other communications over short distances. The remaining fourth is a "single-mode" product that contains a thinner glass fiber and is used in long-distance telephone communications.
The U.S. market alone for multimode fiber has grown an average of about 25 percent for the past three years, according to Kessler Market Intelligence, a Newport, R.I., consulting and research firm that follows the fiber-optic industry.
The amount of multimode fiber sold in this country - measured in kilometers of fiber, not cable - increased from 549,000 kilometers in 1994 to 850,000 in 1996 and is expected to top 1 million this year, said Jerry R. Hobbs, a Kessler analyst. The value of that cable will jump to $433 million this year from $241 million in 1994, he said. Optical Cable's sales would represent about a 10th of that market.
Hobbs ranks Optical Cable fourth among the top five U.S. producers of multimode cable behind Seicor, a partnership of Siemens AG and Corning Inc.; Lucent Technologies Inc.; and Berktek, a Pennsylvania-based affiliate of French cable maker Alcatel. Fifth, behind Optical Cable, is ComScope, a division of General Instrument Corp.
Kopstein, however, ranks his company second behind Seicor in the particular type of rugged, tightly built cable his company makes. Other large makers of short-distance cable make a lot of gel-filled cable, he said.
Optical Cable has a good reputation in the industry and, according to industry interviews, performs a little better than the industry average, Hobbs said.
The company also appears to have a good reputation with its customers, which include utilities, governments and retail distributors. The company will take special orders for cable to be used in unusual situations. It is currently working for instance, on an Australian order that specifies the cable must be termite resistant.
Accu-Tech Inc. of Roswell, Ga., a $70 million distributor of data connections products, named Optical Cable its supplier of the year in 1994 and 1995. Optical Cable's field sales staff helps give the company an edge over competitors, said Dan Delavie, Accu-Tech's president.
Dan MacLennan, vice president of a smaller distributor in Connecticut, Progressive Communications Supply Inc., said Optical Cable's service, including its product literature, is good and the quality of its product is excellent. His company is starting to get more calls for Optical Cable's products in bid requests, he said.
Because of all the positioning going on in the cable industry, Kessler's Hobbs said he wouldn't be surprised to see Optical Cable affiliate with another company.
A merger might be a possibility, if it would provide the most benefit to all involved, Kopstein said. Optical Cable has developed key relationships with other companies around the world, and his company might be able to capture a larger share of the global market by joining with one of them, he said.
Kopstein says he's not concerned about a current shortage of glass fiber for the manufacture of long-distance cable that some fear could stifle the growth of cable companies.
For now, he says he sees a potential for sales growth in a variety of areas, such as: an Internet-related demand for faster communications, an increased use of sensor technologies for security purposes, the development of smart-highway systems, the rewiring of post-Cold War military bases and the big push in Third-World countries to install modern communications systems. But the biggest thing affecting the demand for his company's short-distance cable products over the next 20 years will be the installation of fiber from central switching offices to residential neighborhoods, he said.
"If we can just keep a certain share of the market, [Optical Cable] will grow tremendously," Kopstein said.
LENGTH: Long : 237 lines ILLUSTRATION: PHOTO: CINDY PINKSTON/Staff. 1. Technician Terry Spanglerby CNBchecks the quality of fibers of finished cable at Optical Cable
Corp. She is one of 140 workers at the Roanoke County plant. 2.
Optical Cable president Robert Kopstein says space in the addition
(background) initially will be used as a warehouse. Later it will
house manufacturing equipment. 3. Optical Cable's products transmit
data and other communications over both long and short distances.
color. Graphic: Charts. 1. A Nasdaq report shows the company's path
and stock price since public trading began. 2. Staff. Optical Cable
Corp. color. KEYWORDS: PROFILE MGR