Teledyne tops $2B as commercial play pays off
The cloud and the ocean have helped push Teledyne Technologies past the $2 billion mark.
The Thousand Oaks-based industrial and defense conglomerate said Jan. 24 that its 2012 sales hit a record-busting $2.1 billion, up more than 9 percent from $1.9 billion a year before. Net income also set a record at $161.8 million, compared to $142.1 million in 2011.
The driver is Teledyne’s successful pivot toward the commercial and industrial markets, in particular its focus on undersea exploration and on cutting-edge testing equipment that is being used in a global wave of electronics development to meet demand from tablet- and smartphone-toting customers.
Beneath the waves, Teledyne makes everything from autonomous underwater vehicles — AUVs for short, in contrast to airbone UAVs — to cable connectors for undersea wiring to 3-D imaging systems for creating detailed maps of oceanic features at close range. On Jan. 29, Teledyne fleshed out its underwater imaging abilities by purchasing Reson, a Danish firm whose technology can do broad-area mapping of the ocean floor from a boat, for an undisclosed amount.
Vast areas of the world’s oceans are unmapped.
“You’ll need to do that for an offshore energy project. But you also might need it for a port survey to make sure the sand hasn’t shifted for boats coming into Long Beach,” said Jason Van Wees, head of investor relations at Teledyne. “It could also be used for scientific surveys.”
Another growth area is in electronics testing equipment. Last August, Teledyne acquired LeCroy Corp. in a deal valued at $291 million. That business gave a $46.5 million boost to this year’s sales. The company’s testing equipment are used in developing a wide array of electronics. “Customers will include people like Intel for new chip development, but then it could also be used by someone like Bosch in Germany doing electronics for automobiles,” Van Wees said.
But the cloud is what could drive LeCroy in the future. The company is rolling out oscilloscopes — devices used to refine complex circuits — with ever greater capabilities. The devices are required to design the next generation of electronics to deal networked users.
“What’s happened over the last few years is as the amount of data that exists because of tablets and smart phones and cloud computing grows, there’s just more and more data that’s moved wirelessly and by wireline. That requires electronics test and development,” Van Wees said. “Be it higher speed wireless communications, fiber optics or power electronics — all of those require either higher frequencies or higher resolutions. And that requires new oscilloscopes.”
These days, military and aerospace contracts are about 30 percent of Teledyne’s business. Commercial and industrial applications are about 70 percent “and more than half of that is overseas. In fact, about 40 percent of total revenue is outside the United States,” Van Wees said.
That’s given Teledyne connections to emerging markets that can help smooth over any softness the company encounters in the U.S. or Europe, a classic benefit of diversification. “It’s something we were seeking to do, but it’s also just a byproduct. In a commercial world, it’s a global economy. While the U.S. is a big market, the sum of all the other markets is larger,” Van Wees said.
“We’ve become more international as result of that, given the growth in demand from emerging markets.”
The one dim spot in Teledyne’s 2012 results were its aerospace and engineered systems segments, which both had slight declines and ended at $163.1 million and $70 million, respectively. “We are doing some physical consolidation to keep costs low. If the revenue shrinks because of government budgets, you have to do what you can to control costs,” Van Wees said.
But on the whole, Wall Street has approved of Teledyne’s performance. The company’s shares began 2012 in the mid-$50 range, and this year they are already flirting with $70. Stephen E. Levenson of Stifel Nicolaus, which does business with Teledyne, has a buy rating on Teledyne with an $80 target.
“Filling in holes in the product line make Teledyne a one-stop shop for many imaging and instrumentation solutions,” Levenson wrote in a research note after the full-year results. “We have expectations for more acquisitions. Generating a series of uninterrupted record results while growing the company is not an easy feat, in our view.”
