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Thursday, Mar 28, 2024

SCIENCE—Rockwell Spins Off R & D; Division

More than 20 years ago, Rockwell International established the Rockwell Science Center in then-remote, rural Thousand Oaks to dream up high-tech components vital to its work as an aerospace industry leader. Today, the one-time corporate research lab is on its own. The former Science Center is now the Rockwell Scientific Co., a four-month-old spin-off that has been retooled as a fully commercial venture. The company, which as the Science Center began doing research and development for other firms five years ago, is now expanding its client base by licensing its technologies and plans to manufacture its own products for the first time. “We’re becoming more commercial and not so much a traditional corporate research lab,” said company President and CEO Derek T. Cheung. With 485 employees in a new firm that had $97 million in revenue last year from outside clients while it was still a Rockwell division, Cheung said his company is poised to become a leader among technology firms in the 101 Tech Corridor. Rockwell Scientific is now a far cry from the costly research lab run by Rockwell International. As research and development becomes more and more expensive, some former corporate research labs have closed down and others, like Xerox Corp.’s Palo Alto Research Center and Lucent Technology Inc.’s Bell Laboratories, have seen the scope of their work cut back drastically. In recent years, Rockwell Science Center began to take on contracts from non-Rockwell clients in order to fund its operations, Cheung said. “It was a money-losing venture from the beginning,” Cheung said. “That’s why there are so few corporate research labs around today.” Since being spun off, Rockwell Scientific has moved headlong into a commercial mode by building an additional $25 million, 67,000-square-foot state-of-the-art manufacturing plant in Camarillo slated to open in November. John Baliotti, an analyst with UBS Warburg, said the spin-off move allows Rockwell Scientific to license and develop new products without the constraints of a corporate structure. “They don’t have to worry about dealing with a Rockwell competitor or developing products that Rockwell can’t use,” he said. The switch from a research lab to a full-fledged commercial enterprise is an easy transition to make, said Cheung, given ideas developed at the center in the past, perhaps not essential to Rockwell International’s core strategy, became moneymakers for other companies. “We had people develop things here and then leave and take them somewhere else,” Cheung said. Time and time again, the center saw its best and brightest head out the door to form their own companies, firms like GTran Inc. of Westlake Village, Opto Diode Corp. of Newbury Park and Telcom Devices Corp. of Camarillo. “They were building their own companies with products we developed here and we weren’t getting any benefit at all from that,” Cheung said. “It was very frustrating.” Cheung’s frustration, however, was not lost on Rockwell International’s leadership, which saw the benefits of spinning off the unit as an independent company still owned by Rockwell. They recognized that not every technology that starts out as the germ of an idea becomes a product that Rockwell can use. The idea was to continue its own research and development work while allowing Rockwell Scientific to operate more as an independent enterprise, developing technologies that it could then market and perhaps even manufacture itself, said Steve Smith, a spokesman for the former Rockwell International. “The thinking was to make the company more independent and have it focus more on its commercial efforts,” Smith said. Rockwell Scientific still does much of its work for the federal government, parent company Rockwell Automation and Boeing but, Cheung said, unlike in the old days, it is now free to pursue clients that compete directly with Rockwell Automation. “We’re like any other business now, free to find our own customers,” he said. “It’s about profit now. Not anything else.” Making decisions in Thousand Oaks rather than at Rockwell Automation’s Milwaukee headquarters allows Rockwell Scientific to better respond to its market and develop its own products, Smith said. “Rockwell was also wanting to focus more on its core automation business and less on its other businesses, which were eventually spun off,” he said. Earlier this year, the Rockwell parent company spun off its avionics and communications unit, Rockwell Collins, to its shareholders, along with its automotive engine manufacturing unit, the Meritor Automotive Co. Rockwell International’s spin-off mania began in 1993 when it parted company with its aerospace and defense unit (which included Canoga Park’s Rocketdyne Propulsion and Power) and sold it to the Boeing Co. “We were fortunate that we were able to take advantage of our market and develop not only our market share, but customers to license our technology,” Cheung said. Already, the company has provided venture capital funding to Oxnard-based Acelo Semiconductor Inc. which makes high-speed semiconductors. Cheung said that won’t be its last investment either.

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