An optics maker with laser-sharp vision

When Dr. Yaacov Zerem co-founded Ophir Optronics in a tiny room in 1976, his vision was clearly long-term.

"I wanted to build a company that would bring in annual sales of $30 million after 25 years," the company's president and chairman of the board says as he sips tea in his office in Jerusalem's Har Hotzvim industrial park.

Zerem puts down his glass and smiles. Almost 27 years later, his company is showing annual turnover of $26m. after years of slow but steady growth. "I didn't meet [the goal] precisely, but I was close," the former physics instructor says.

For Zerem, the only things more precise than his strategic vision are the laser measurement devices his company manufactures. That razor-sharp forward thinking and commitment to quality are some of the reasons the Manufacturer's Association is awarding him its Manufacturer's Prize this week. Zerem's persistence in developing a global industry leader from a three-man operation – in an era when the term "startup" had not yet entered the lexicon – is another.

Conceived by three PhD's with less money than confidence, Ophir is now a world leader in laser measurement devices and optics, with five international subsidiaries and sales around the globe.

Its measurement devices, which are used to test the power, energy, and profile of lasers used by manufacturers, medical facilities, science institutions, and telecommunications providers, are known for high quality and accuracy, Zerem says. The company leads this market in Europe and Asia, and is No. 2 in the United States following the recent merger of two competitors there. It has offices in the US, Germany, and Japan to handle sales and generate customer service revenues in each region.

On the optics side, Ophir focuses on thermal imaging equipment designed primarily for military applications. In the past 25 years, it has provided lenses for most of the IDF's infrared equipment and its advanced missiles, including the Arrow anti-missile system.

Zerem notes that Ophir established a lens manufacturing facility in Massachusetts in order to retain eligibility for US foreign aid programs, which require militaries to spend their defense grants within the country.

The company's non-military optics sales have included hundreds of lenses used in airports recently to detect SARS patients. It has also sold thousands of lenses in technology to let firefighters see through heavy smoke, and systems designed to help airplanes land safely in heavy fog and rain. The company's precision optical coating, polishing, and diamond cutting tools can sculpt lenses measured to less than a micron, or millionth of a meter.

Zerem adds that Ophir is developing a new business sector, conoscopic holography, in a separate subsidiary here in Israel. This unique technology allows users to accurately measure small objects and spaces in three dimensions, enabling scientists and manufacturers to create custom models more easily and exercise more in-process control.
Among its clients is an international dental firm that uses the company's sensor at the heart of a system that models patients' teeth and fits them for dental appliances. More such deals are on the way, Zerem believes.

Ophir currently owns a new 5,000-square meter office in the heart of Jerusalem's hi-tech center, and employs 170 workers locally. (With its subsidiaries, that number reaches to more than 200.) The company's sophisticated equipment and gleaming windows belie its humble beginnings.

When Zerem, along with co-founders Ephraim Greenfield and Ephraim Sekemski, started Ophir in 1976, they were producing optical coatings for infrared in a 15-square meter office in Jerusalem's Machon Lev technology institute. The group launched the business with a few thousand dollars of their own money, and they were decidedly underdogs.

"People would tell us we had no chance of succeeding, that you couldn't survive in this business without a family business or 30 years of experience," said Zerem, who was also teaching at Machon Lev at the time. "But our strength was in our self-confidence. We believed that we could achieve and everything is possible."

That confidence helped the team to win contracts. Zerem tells how, in its early stages, his company would offer skeptical customers in the IDF higher quality products than were available in the market – and then work around the clock to deliver as promised.

Zerem's face fills with pride as he recalls those days, but then his voice takes a more serious tone.

"It was the military's high level of requirements that enabled us later to develop the complete line of products that we now sell to the civilian sector," he says. "The military's driving us to develop state-of-the-art equipment technology forced us to improve our R&D and production standards. We were able to cooperate with the IDF – they would keep us informed about upcoming projects so we could develop optics for the future. In the US, they wouldn't tell us any information unless they needed to place an order. I believe this is why the defense establishment has been such an important driver for hi-tech here, and I fear that if the IDF cuts down its purchasing, it will have negative effects on R&D for the civilian sector in the future as well."

After its first year, in which the company worked exclusively on R&D, Ophir grew quickly. The company moved to a larger office in Har Hotzvim three years after it was started. That office would be expanded six times before the company moved to its current location nearby.

Growth has been slow, but steady. The company went public on the Tel Aviv Stock Exchange in 1991, and has risen 13% this year to its Wednesday level of NIS 8.28. In the second quarter of this year, the company earned a net profit of NIS 1.8 million, 82 percent higher than a year earlier, as sales fell by 8% to NIS 28m. The earnings growth follows a difficult 2002, in which the company netted only NIS 1.9m. during the worst of the global tech slump. The company exports 70% of its production.

Looking to the future, Zerem's plans are, as everything else, confident yet conservative. "We expect to continue to grow in our three markets, continue R&D, and maintain our position as the leading developer of high quality optics and laser measurement devices," he says, with a tone that makes him sounds sure it couldn't be any other way.

Zerem is not flashy, but when good fortune comes his way, he likes to share it. The buzz among Ophir's employees this week was about place settings at the Manufacturer's Association party on Thursday, celebrating Zerem's receipt of the Manufacturer's Prize. Zerem will receive the award along with Taro Pharmaceutical Industries CEO Shmuel Rubenstein, Blades Technology International CEO Amram Zafran, Frutarom Industries president and business manager Uri Yehudai, and El-Op head Haim Russo. They join 137 other industrial leaders who have won the prize in the past 28 years.

Zerem, true to his style, credits his employees with the bulk of his success.
What advice does the seasoned veteran have for budding entrepreneurs? Again, Zerem's wisdom boils down to vision.

"It is important to be on the cutting edge of technology, but the more important part is developing a knowledge of the market and its needs from one side, and vision and dedication from the other side. You have to give yourself over to your goals completely," he says. "And most importantly, be a role model and a mensch."

This article can also be read at the Jerusalem Post site