IPG Photonics Corp (IPGP)

This one is finally cheap enough to jump on board. However, I do so with some mixed feelings and a bucket of long term concerns. IPG is the first significant mover in an emerging technology. Fiber lasers have significant advantages over traditional CO2 lasers in certain applications, not the least of which is lower maintenance costs. For now, IPG is the market leader in this field. While I'm sold on the technology, I'm less sanguine about the company and its management. It is a controlled company in the sense that the founder and his son hold a 50%+ stake. They will be making the decisions and shareholders are along for the ride.

In a situation like this, it is really a bet on management. And there is the rub. I've been put off by what I view as a somewhat arrogant attitude. When I hear the CEO say that their secret recipe for making these devices is safe because they compartment the information and only the folks at the top know the complete recipe, it raises a red flag. Is this a manufacturing company or a clandestine operation? My longer range concern has to do with competition. The established laser companies are all in the process of introducing competing products. When they do, it will come down to who has the better sales, service, and support infrastructure. This competition is established globally and has worked with the customer base for many years. Can IPG compete on a level playing field with price, reliability, and support as the important factors, or will it fade as its first mover advantage weakens and its technology becomes less important than its customer service?

We'll see over the next few years. In the meanwhile, I think it will beat the broader market.