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OCP Building Sold, 124 Jobs Cut in March

More than 100 employees at Optical Communications Products have been notified they will be laid off this spring when its Woodland Hills facility closes. The 150,000-square foot manufacturing site on Variel Avenue has already been sold by Oplink Communications Inc., the parent company of OCP. Oplink executives declined to be interviewed but in a conference call on Jan. 31 to discuss the company’s second quarter financial results, CFO Shirley Yin said OCP would occupy the Woodland Hills facility for about six more months before moving to a smaller facility at an undisclosed location. In late January a half dozen employees were let go, according to documentation from the state Employment Development Department. Another 124 employees, primarily assemblers, supervisors, and testers, are expected to be cut in March. The staff reductions and facility sale are part of an overall effort by Oplink, a manufacturer of optical networking components and subsystems based in Fremont, to lower overhead costs and improve efficiencies as it integrates the Valley subsidiary into its operations. An OCP supplier in Taiwan was also closed and all assembly by the subsidiary will be transferred to other Oplink locations, President and CEO Joe Liu said during the conference call. OCP was among the last telecom companies still manufacturing in the U.S., holding off on sending all its assembly off-shore even as the competition made that move. It was remarkable that OCP continued to do some manufacturing in California although it makes sense for the type of product modification work the company does, said Tom Hausken, director of market research for Strategies Unlimited. “It’s easier to do that when you are closer to the customer,” Hausken said. Telecom manufacturing still takes place in the U.S. but typically for low volume, customized products. OCP was transitioning into high-volume production and were behind the curve, which is why they partnered with a contract manufacturer in China, said Michael Coady, research analyst with B. Riley & Co., a research trading and investment banking firm. Oplink is a client of Riley, which has rated the company’s shares a buy. 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. Just a year ago, OCP embarked on a new strategy to expand into Asian markets and contracted out some of its manufacturing to a Chinese company to improve its profit margin. A few months later Oplink entered the picture looking to buy Furukawa Electric Co.’s majority share in the company, an offer not welcome by company management. The OCP board adopted a “poison pill” provision to delay the buyout. Oplink in turn filed a lawsuit challenging the validity of that provision. The deal went through after Furukawa added members to the board to assure approval of the sale of its share to Oplink. Purchase of the remaining shares by Oplink closed in October. There has been “meaningful” progress with integrating OCP into Oplink, Liu said during the conference call. Transferring manufacturing elsewhere results in several large customers needing to make sure that the products they buy meet the same quality standards and specifications as when made in Woodland Hills. That re-qualification process is expected to cost Oplink between $2 million ad $4 million in revenues in coming quarters, Liu said. The moves by Oplink accelerate the process OCP had already started but at a less expensive cost because it consolidates two supply sources, Coady said. As the integration moves forward, the goal of Oplink is focusing on the products and reducing the supply chain to make it more efficient and widen the margin for the company and customers, Liu said.

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