We took several key actions in 2006 to execute our strategy. We added a vital capability to our life and health sciences product portfolio by acquiring the laser products business of Picarro, Inc. during the fourth quarter. The addition of Picarro’s CyanTM 488 nm blue laser to our existing ExcelsiorTM compact diode laser family now gives us the complete color palette of essential wavelengths required by bioinstrumentation manufacturers, which will support our growth in the life and health sciences market in 2007 and beyond.
We invested significantly in new products during 2006, increasing our spending for research and development (R&D) by $6 million, to $42 million or 9.2% of sales. We expect to continue to increase our investment in R&D in the future. This is important not only to realize our complete "Make, Manage and Measure LightSM" strategy, but also to achieve our goal of deriving at least 25% of each year's sales from new products introduced within the prior 18 months. We have achieved that goal in each of the two full years since we acquired Spectra-Physics.
We are directing a large portion of this increased R&D investment toward the development of promising new lasers and laser technologies. One key area of our R&D focus is fiber laser and amplifier technology, which offers inherent advantages in cost and performance efficiency, power scalability, reliability and beam quality for certain applications. We have been developing this technology for some time, and have recently created a new Fiber Laser Business Group within our Lasers Division to drive our efforts in this area. This new group will bring to market products that integrate our leading-edge capabilities in diode lasers, fiber coupling, optics, frequency conversion and photonics packaging. These products will enhance our existing portfolio of diode-pumped solid-state lasers, will enable us to address new applications in our existing markets and to grow into new markets and applications, and will add greater breadth to our integrated photonics solutions strategy.
In 2006, we increased our focus on the growing market for solar power technology, which represents a promising growth area for Newport. Global demand for alternative energy solutions such as solar power is growing as industry and governments look for ways to reduce their dependence on oil and protect the environment. Newport’s products and capabilities are well-positioned to address the needs of this fast-growing market in a number of ways. We are producing advanced lasers for solar panel processing, solar simulator testing systems for research and quality control, and systems incorporating laser technology to improve the speed and quality of solar panel production.
We continually strive to bring Newport's technologies together for customers in a way that directly addresses their specific system or subsystem application needs. Last year, our Integrated Solutions Business delivered more than $50 million of solutions incorporating our lasers, optics, opto-mechanics and motion technologies, primarily to original equipment manufacturer customers in the life and health sciences and microelectronics markets. We also opened a Technology and Applications Center at our Irvine, California headquarters, which is staffed with experienced laser scientists who have been tasked to develop the best configurations and techniques to produce the highest performance from our products in advanced research applications. This new center has allowed Newport to demonstrate to scientists and researchers the performance advantages provided by a total system comprised of optimally-matched Newport products.
A major initiative for us during the year was the implementation of SAP as our company-wide information technology system. This global system will provide integrated planning, production, logistics and sales capabilities for Newport. An important component of our strategy is to be able to combine products from around the company to offer complete solutions seamlessly to customers, and our SAP platform will help us do that. We have transitioned to SAP at four of our U.S. locations and will deploy SAP at the remainder of our U.S. and international sites over the next 12 months. We believe that the many features of this integrated system will help us increase our global competitiveness and maximize the effectiveness of our customer service.
We hope you will enjoy the many new features that this web-based report offers, including videos and an increased number of stories and images on our company and products. You can download and print a copy of the report, or you can enjoy the increased content and flexibility of the version. We hope you will find this report to be a great resource for information on Newport.
Robert G. Deuster
Chairman and Chief Executive Officer
