Having weathered a downturn in the telecommunications industry, Optical Communications Products, Inc. now faces a transition year as it goes into 2007. On the upside for the Woodland Hills manufacturer of fiber optic components is the anticipated growth in the sector of the technology industry it serves and a strategy with an emphasis on expanding into Asian markets. On the downside are layoffs predicted for later this year as manufacturing moves overseas to China. Indeed, Optical Communications is one of the last remaining telecom companies still manufacturing in the United States whereas its competitors have become, in the words of company CEO and President Philip Otto, Asian-centric. Without the move to have its products made overseas, OCP faces further reductions in its profit margins, Otto said during a conference call in December to report on third quarter financial results. “We’re going to be joining them rather than fighting them from Woodland Hills,” Otto said. Optical Communications was founded in 1991 and went public in 2000. It counts Alacatel, Cisco Systems, and Juniper among its largest customers for its transmitters, transponders, and transceivers and other components used in local, metropolitan and storage area networks. Furukawa Electric, of Tokyo, owns more than half the company stock. Attempts to reach CFO Frederic Boyer were not successful. Among the transition for the company has been a change in management as its three founders Tran Van Muoi, Susie Nemeti, and Mohammad Ghorbanali have bowed out of day-to-day operation of the company. Muoi remains as chairman of the board. Nemeti, the former chief financial officer resigned in December. Ghorbanali, the chief operating officer, left the company in October. That management team husbanded the company’s resources and built up the balance sheet so that it would be ready to seize opportunities when the time was right, Otto said. That is not a view shared by all following the OCP’s progress. Michael Coady, a research analyst with B. Riley & Co., said the company’s old management team was more reactive than proactive and allowed OCP to slide into a state of non-competitiveness. For instance, the company has been slow in getting to market with productsfor 10 gigabit Ethernet, the fastest connection available for the Internet and a fast growing sector of the tech industry. OCP will make available 10 gigabit products during fiscal 2007. “Their inability to get into that space has definitely been a detriment,” Coady said. Change in fortunes That OCP has fallen behind in a key market sector is a change from 2001 when the company was named the number one hot growth company of the year by BusinessWeek magazine. That designation was made based on a 161.9 percent increase in profits and 127.9 percent increase in sales between 1998 and 2000. Between fiscal years 2002 and 2006, the company earned a net profit three times. B. Riley rates OCP shares as a buy in its most recent analysis although Coady said the company is not doing especially well. But there are moves the company has taken to improve its financial performance. In August, it acquired GigaComm Corp., a Taiwanese supplier of passive fiber-to-the-home components. The purchase gives the company a second source of lasers to integrate into its products to be more cost effective and cost competitive which translates into a faster turnaround time for getting that product out the door. In November came the news the company had reached an agreement to move some of its manufacturing to SAE Magneticks Ltd. in China. The agreement results in layoffs of 150 to 180 manufacturing positions in Woodland Hills and 70 to 80 positions at the GigaComm facility. Focusing on the Asian market is a key strategy of the new management, Otto said during the conference call. Otto joined the company in May as the interim chief financial officer and was elevated to his present position in July when Boyer took over the CFO slot. Having manufacturing in China is a plus for the company because of the capacity for high volume production and close proximity to customers and their supply chains, Otto said. “This move to manufacturing with SAE has been favorably received by key customers who appreciate that we will be able to better serve them,” Otto said. The move of manufacturing to China will result in additional unused space in the Woodland Hills facility. The company owns the 150,000-square foot building and did have subtenants there until this year, Boyer said during the conference call. “The plan is not to bring any more subtenants in because we want to maintain maximum flexibility about what we’re going to be doing as far as what our real estate strategy is going forward,” Boyer said.