10/07 interview with cook

Below is from a 10/7 interview


http://www.twst.com/notes/articles/lzs096.html


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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