The board of Israel-based On Track Innovations has named a new CEO to lead the struggling contactless and NFC vendor, following the ouster in December of company co-founder Oded Bashan from the post.
In perhaps a surprise move, board members–most of whom were elected in December following a successful proxy battle by a U.S.-based group of dissident shareholders–hired a current executive with the company, Ofer Tziperman.
Tziperman, 50, has served as president of OTI’s parking payments business, Parx, which runs the vendor’s EasyPark electronic parking metering and payments product line, since 2011.
He had earlier worked at OTI, serving nearly five years as vice president of marketing and sales in the late 1990s, before leaving to co-found an Israel-based mobile location-based services company, LocatioNet Systems.
“We’re very, very busy serving our customers; we didn’t have time to bring someone in from the outside,” board member Chuck Gillman, one of the leaders of the dissident shareholders and who has been a spokesman for the group, told NFC Times. “The most important thing was he was a person already inside the organization, as it existed.”
Seeking Reversal of Fortunes
Tziperman and the new board have their work cut out for them if they are going to try to turn around the company, which hasn’t turned a profit in its 23-year history.
In its third quarter 2012 results, the last financial statement the company has released so far, OTI said it had lost $7.6 million through the first nine months of the year, up from a loss of $5.9 million for the same period in 2011. Revenue for the first three quarters of 2012 was $29.7 million, down 16% from 2011.
In today’s announcement, the company said it planned to release “preliminary” full-year 2012 results on or around March 18, but there was no word on final results, indicating there are problems with the books.
Gillman said he couldn’t comment on the reason the board has delayed the release of the year-end report and has only promised preliminary results. He added he could comment little on Tziperman’s qualifications and declined to discuss any strategy for the company–citing a quiet period before release of the results and other restrictions.
According to Israeli business publication Globes, OTI lost a cumulative $175.3 million between 1998 and the third quarter of 2012.
This and a falling share price prompted the company’s second largest investor, Jerry Ivy, to front a group of veteran proxy fighters. They launched an effort to take control of the board, which they accomplished on Dec. 30, when shareholders elected eight new board members.
A week earlier, seeing the handwriting on the wall, company co-founder Oded Bashan submitted his resignation as board chairman. Earlier in December, he stepped down as CEO, and the post had been vacant until Tziperman’s appointment.
Bashan is still chairman of the board, but it remains to be seen whether he will stay in the post until June, the end of the notice period for his contract. His son Ohad also resigned in December as president and chief marketing officer of the company.
Investors Unimpressed So Far
The changes in the board and resignations of the Bashans so far have not swayed investors, however. OTI’s share price has lost a third of its value since the board takeover in late December, closing at $1.03 per share on Friday. That’s getting close to the company’s record low share price during the past 10 years of 88 cents, recorded in September of 2009.
“Competitors have announced terrible results the past couple of weeks,” explained Gillman. “Our competitors are under tremendous profit pressure. Investors are nervous about the (NFC) industry.”
But he added: “There’s nothing to make investors nervous about us.”
He declined to specify which companies he was referring to, but among them was probably France-based NFC and contactless chip maker and ID company Inside Secure, which last week announced job cuts to stem losses.
More Aggressive on Patent Revenue
Among OTI’s strategies is the likelihood that the vendor will try to capitalize on what the company believes are valuable NFC patents. Inside Secure in its financial report last week also said it would more aggressively pursue patent revenue, among other measures.
In today’s announcement of the CEO appointment, OTI noted that Tziperman, as president and CEO of his location-based services company, “gained practical experience in monetizing the LocatioNet patents.” LocatioNet Systems now appears to be inactive.
OTI had already been stepping up its efforts to collect on the patents.
A year ago, OTI announced it had sued T-Mobile USA, alleging the telco’s NFC phones infringed on one of OTI’s NFC mobile-payments patents–though T-Mobile, which is part of the Isis joint venture, had yet to introduce any NFC mobile-payment service at the time.
In November of 2011, OTI announced what it called its first nonexclusive licensing deal, valued at $7 million, for its IP and patents to a “multibillion dollar corporation.” OTI declined to release the name of the corporation, but it is believed to be Samsung Electronics, which would have licensed OTI’s NFC technology for its mobile division.
OTI could seek more licensing revenue for its patents or even try to sell them.
But Gillman earlier told NFC Times that there were no plans to break up the company.
Job Cuts Likely; Pool Closed
Cost cuts and a restructuring are likely, however.
The company reportedly had nearly 300 employees globally at the end of 2011. It has not yet announced any job cuts, however. Members of the dissident shareholders group earlier pointed to OTI’s engineering talent as one of its strengths.
But a source told NFC Times that one of the first things to go was what the source described as a heated indoor Olympic-size swimming pool at the company’s headquarters in Rosh Pina, Israel. The pool has been closed, said the source.
“Cost of fuel in Israel is exorbitant,” the source explained.