President's Column
President's Column |
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Phillip J. Anthony |
I am heading down to Anaheim, California, for the Optical Fiber Communications Conference starting this weekend. Early indications are that it will be bigger, better, and more exciting even than last year’s phenomenally successful gathering of the community. The scheduled papers promise many new insights, improvements, and extensions to fiberoptic technologies. The trade show will offer the latest views and products from both traditional vendors as well as companies new to the field this year.
I suspect, though, that there will be an undercurrent of concern compared to last year’s conference, at which venture capitalists roamed the halls in unprecedented numbers. Many of the participants will be wondering about the current value of assets related to photonics. It does appear to be a bit harder to assign accurate values these days. Whether it is the market capitalization of a photonics company, the prospects for funding the business plan for a new product concept, or the pricing of technical journals, the values that may be assigned seem to have larger ranges than a few months ago.
At this time last year, stock prices of photonics companies were near their peaks. Market capitalizations of public companies were several times revenues and very large multiples of projected earnings. After decades of building the technical and business foundations for fiberoptic communications, the industry had been discovered by both Wall Street and Sand Hill Road. Money was readily available to fund new startups, even for rather technically risky business plans. Now, stock prices are down 75% from those highs. Venture capital is harder to find, and some proposed IPOs have had to be withdrawn.
The fundamentals of the technology have not changed radically. Bandwidth is still needed in increasing breadth and length. Performance is still improving, and prices of solutions are declining. But when stocks are valued on the basis of estimated future revenues that are projected based on exponential growth, changes in that exponential growth rate make large changes in the estimated value. As the overall economy slowed late last year, especially in North America, expectations for growth fell drastically.
At the conference, I expect that the prospects for returning to higher rates of growth will be discussed often in the hallways. But the value of the OFC Conference itself seems not to be in question, based on the early projections for significant growth even as many companies place restrictions on travel. Information apparently still has the same value as last year.
That brings me to journal pricing. What is the value that we place on the journals that LEOS produces? We charge nominal amounts for LEOS-member subscriptions (between $15 and $35). We sell subscriptions for about twenty times that amount to non-members and subscribers who use the journals for more than personal use, such as libraries. Comparable non-profit journals in photonics average about twice what LEOS charges as the price per published page. Commercial publishers tend to price their technical publications about four to eight times higher than we price our publications to non-members.
Should we be charging more, comparable at least to other non-profit organizations? Arguments against doing that are that many libraries are under severe budget constraints, that the Society has a large surplus at present, and that part of the LEOS mission is to disseminate information about our field of interest. Arguments for larger increases are that the journals do have a higher value than their current price, that other organizations and companies are perfectly willing to take a larger share of libraries’ budgets that we forego, and that the Society surplus may dwindle as investment returns (including the fraction of Society reserves invested in photonics-related stocks) turn negative.
For the past three years, we have held the non-member price increases to roughly the rate of inflation, following seven years of approximately 10% per year increases. (Member subscriptions have remained at nearly the same prices for eight years.) This year and next year, the Board of Governors has approved raising non-member subscription prices by between 6 and 14% per year, more than recently but much less than their apparent value.
The hope now is that other aspects of photonics are also similarly under-valued and that increases at least as large are soon forthcoming.