On December 17, The Wall Street Transcript interviewed Shevach Saraf, Chairman, President, Chief Executive Officer and Chief Financial Officer of Solitron Devices, Inc. (OTCQB:SODI). Key excerpts follow:
TWST: We'd like to begin with a brief historical sketch of the company and a picture of the things you're doing at the present time.
Mr. Saraf: Solitron Devices was started in 1959. At the present time, 90% of our customers are defense and aerospace companies, and 10% are commercial customers.
TWST: How has the company evolved?
Mr. Saraf: The company grew in the early years by several mergers and acquisitions and then the company downsized considerably in 1992. In the mid-1990s, while we were focusing on selling high reliability products to the defense and aerospace companies, the Secretary of Defense pushed the concept of forcing the defense establishment to buy what they call COTS (commercial off the shelf) items. That in turn resulted in reduced potential market share to companies like us and for a while our size was reduced further. Later, when several larger companies left the defense segments, that created additional opportunities for us to grow back up to the current size.
TWST: What are the key elements in your strategy as you look out over the next two to three years?
Mr. Saraf: To find the customers that look for manufacturers like us that have the capabilities we have. I neglected to mention one more thing. Another shortcoming in the strategy of using COTS is that because of market forces, the life of commercial items is very short. For example, if you look at the computer that you bought two years ago, a year ago it was obsolete and it's now obsolete again. As a result of that, commercial items that have been originally designed in by any defense contractor now need to be replaced because they are no longer available or obsolete, therefore creating opportunities for companies like Solitron to come at the back end and revive the availability of those devices because otherwise the cost of redesigning and retesting is very high; it's cost prohibitive. When we come and say, okay we can do those obsolete items, we are welcomed with open arms.
TWST: What is your feeling about your current stock price?
Mr. Saraf: I believe that our stock is underpriced. If you look at the current market valuation and compare it to shareholder equity or the cash position of the company, you see immediately a glaring discrepancy.