AEI technology

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AEI technology

Who is Amtech?

Amtech is a pioneer in electronics transportation systems. The company began in 1983 when the US Department of Agriculture released the patent for an 11-year old radio beam system. The first use of this technology was in the field of livestock monitoring. This later evolved into traffic and inventory management.

Today, Amtech focuses its research and technology development on two market segments: Automatic Equipment Identification (AEI) and Intelligent Vehicle Highway Systems (IVHS). AEI uses radio beams to track inventory by scanning an electronic tag that is attached to the car or cargo unit. IVHS was a by-product of AEI, in that it uses tags to automatically deduct toll payment as vehicles pass through a tollbooth.

Amtech has established itself as the AEI industry leader by becoming the American Association of Railroad’s mandated standard. On the other hand, the IVHS market is filled with competitors competing for electronic toll contracts throughout the United States. AEI and IVHS are in place in both domestic and foreign markets. In the domestic market, Amtech is partnering with Motorola. It’s pursuing the foreign markets through alliances with Alcatel Amtech in Europe, Mitsubishi in Asia, and Sino-Amtech in China.

What’s the Problem?

Amtech has almost completed delivery of AEI system tags to the railroad companies, and the market isn’t showing much growth potential. Also, they have been unsuccessful in securing future contracts. Their stock price has witnessed a decrease from $33 to 10 in a span of three months due to the anticipation of decreased cash flow. Pressure has been mounting from the shareholders for management to take action to boost the stock price back to levels of expected growth. Amtech has the unique predicament of being caught in markets that are neither growing nor mature enough to provide a steady or growing revenue stream.

Aspects of the problem:

§ Have yet to determine proper allocation of resources for best possible return.

§ Strong competitive forces in the IVHS market.

§ Maturing market for AEI.

§ Reliance on one product for critical revenue stream.

§ Product portfolio not diversified.

SWOT Analysis

Company Strengths:

§ Opportunity to broaden market in AEI because of their market dominance.

§ Strong brand equity as the leader in transportation electronics.

§ Ability to tap into the IVHS market potential.

§ Foreign market presence through alliances in AEI and IVHS product lines.

§ Established distribution channels in foreign markets.

§ High debt capacity to finance future growth.

§ $50 million in cash and marketable securities.
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