Flat-panel firm OIS shuts down as efforts to gain new financing fail

Sterling begins looking for new sources of arrays

The market introduction of digital x-ray systems may have received an unexpected challenge this month when active-matrix liquid crystal display developer Optical Imaging Systems (OIS) ceased manufacturing operations after its majority shareholder discontinued funding for the company. OIS contributes thin-film transistor flat-panel arrays to Sterling Diagnostic Imaging for that company’s DirectRay technology.

OIS of Northville, MI, had been attempting to secure additional financing or a sale of the firm since February, when the company engaged investment firm BancAmerica Robertson Stevens to approach strategic and financial investors. Although BARS approached a number of these potential investors, OIS announced in early September that this initiative had not been successful, and that its majority shareholder, Guardian Industries of Auburn Hills, MI, was seriously considering discontinuing its funding of OIS.

OIS said at the time that it was in discussions with its major avionics display customers to explore selling the company. OIS is a major supplier for displays used by several defense contractors. When those discussions apparently failed to pan out, Guardian informed OIS of its decision to discontinue funding, and on Sept. 18, OIS shut down its manufacturing operations and laid off approximately 220 employees. A core group of employees required to implement the shutdown will stay on for a limited period of time, and the firm is considering dissolution and liquidation of its assets. OIS declined to return calls seeking additional comment.

The OIS plant shutdown comes at an awkward time for Sterling. The company received clearance for its DirectRay systems in July, and has been building its marketing efforts for the products (SCAN 7/22/98). Sterling is working with OIS to complete as many in-process arrays as possible before OIS ceases operations.

A consortium of OIS customers has made offers to purchase certain assets of the company, and Sterling remains optimistic that a new operator will acquire the assets and resume production, said Ernest Waaser, COO for Greenville, SC-based Sterling. The U.S. Department of Defense and the Department of Commerce are both actively involved with OIS and its principal customers to find a workable solution, Waaser said.

Meanwhile, the impact on Sterling’s DirectRay technology and iiRAD equipment production has not yet been determined. It will depend on the number of OIS arrays that have already been completed and the time it takes to qualify a new supplier or find some other solution, Waaser said. Sterling has enough TFT arrays in inventory to meet its production needs through the end of the year. In addition, Sterling believes that several hundred arrays are in the development process at OIS, and the company is attempting to confirm the number and completion status of the panels, said Jayne Seebach, director of global marketing and communications for Sterling.

Sterling has begun discussions with other companies about potential TFT array supply relationships. It is moving to begin the qualification process to ensure that components from these companies meet Sterling’s criteria. The qualification process for another supplier typically takes about six to 12 months, although Sterling would expedite that process as much as possible, she said.