PETROLEUM DIRECTORY: RAE Systems Inc.: Company’s new toxic gas and radiation detectors come in mini-sizes

Leading developer and manufacturer provides early warning of hazardous materials exposure and specific gas alerts

Q. Where is RAE Systems located?

A. RAE Systems is headquartered in San Jose, Calif. We have sales offices throughout the United States. The headquarters mailing address is 3775 N. First St., San Jose, CA 95134. Telephone and fax numbers are: (408) 952-8200 and fax, (408) 952-8480. Other main offices are in Denmark and Hong Kong. The company’s Web site is at www.raesystems.com.

Q. When was the company founded

and who founded it?

A. RAE Systems was founded in 1991 by Robert Chen and Peter Hsi, both engineers concerned with keeping people safe and developing a way to protect and restore the environment from chemical spills.

Q. Who heads up RAE Systems and who is on its senior management team?

A. RAE Systems is a U.S. public company with the stock symbol RAE, trading on the American Stock Exchange (AMEX). Mr. Chen is CEO and chairman of the board; Mr. Hsi is the chief technology officer. As mentioned, they founded the company. Other officers include Don Morgan as chief financial officer, Rudy Mui as vice president of marketing and H.T. Sun as vice president of engineering. Our management team is established and cohesive, with a track record of delivering 25 percent compound annual growth in revenue. In addition, the company established a strong scientific advisory board that participates in long-range marketing and product development strategies.

Q. Describe any partnership arrangements associated with RAE Systems.

A. RAE Systems has several strategic partnerships that have played key roles in the company’s growth and solution offerings. Safer Systems was tapped for its expertise in plume modeling software that has become our PlumeRAE product. It is used with our rapidly deployable gas monitors to create the world’s first portable plume measurement system. This is currently used by oil refineries, chemical plants and emergency first responders.

RAE Systems partnered with NetBotz Corp. to create a bridge from local sensor networks to the Internet so that sensor data can be shared in real time with remote management offices and experts. Ember Corp. provided the base design for use in our next-generation pervasive sensing products, called RAEWatch.

Q. What services does the company offer, and for what business sectors?

A. RAE Systems manufactures chemical and radiation sensors for various markets including offshore oil platforms and refineries, petrochemical plants, transportation facilities and storage operations. (Also, see next response.) Products range from single-gas disposable sensors for worker safety (oxygen level, lower explosive limit, carbon monoxide, hydrogen sulfide, hydrogen cyanide, sulfur dioxide and others), to portable monitors for confined space entry, to wireless systems used in plant turnarounds for real-time continuous “hole watch.”

RAE Systems holds 15 patents in photo-ionization technology for measuring volatile organic compounds (VOCs) such as benzene and other carbon-based solvents. Our company was the first gas detection company to offer multi-gas monitors for worker safety.

Q. Who are the company’s main customers?

A. Our early customers were businesses concerned about volatile organic compound (VOC) contamination of U.S. Environmental Protection Agency-designated Superfund sites. We quickly found a market in worker safety and leak detection. Since then we have also served the world’s leading oil exploration, drilling and production companies, the U.S. military, military and civilian aviation operations, most major city fire departments and hazmat teams and, of course, environmental remediation companies. Federal agencies, such as the Department of Homeland Security, the Department of Justice, and the Department of State, also use our products.

Q. How many employees does RAE Systems have? How many in each of its locations?

A. RAE Systems has 120 employees in the United States, and more than 300 in our global manufacturing facilities.

Q. Describe your essential equipment in general terms.

A. Single-gas, multi-gas, wireless and radiation monitors and systems. We are a leading global developer of rapidly deployable chemical and radiation detection monitors and multi-sensor networks for homeland security and industrial applications. RAE Systems’ technologically advanced products are based on proprietary technology, and include a full line of portable, wireless and fixed atmospheric monitors and photo-ionization detectors; also gamma and neutron radiation detectors for detection and early warning of hazardous materials.

Q. Is your company expanding any of its operations and/or locations?

A. We moved to a new world headquarters in June of 2005 to accommodate growth. Our overall growth strategy is focused on expanding penetration in multiple markets and leveraging our infrastructure in China. We are interested in obtaining cost efficiencies, pursuing acquisitions and advancing other strategic relationships.

Q. What is RAE Systems’ main strength, i.e., its edge over the competition?

A. Unquestionably, it is our expertise in gas detection and gas monitoring systems. We were the first to deploy a multi-gas monitor with a photo-ionization detector for VOCs. We were the first to offer a parts-per-billion (ppb) total VOC monitor, the first to offer a dedicated real-time benzene monitor and the first to offer wireless gas detection.

We offer world-class customer service and application specific user training for safety managers as well as for first responders. We hold active user seminars for our equipment, and this high level of support has enabled RAE Systems to build a strong brand and differentiate itself from competitors.

Q. What new markets, clients and/or projects has RAE Systems recently attracted?

A. We have recently become the leader in wingtank entry kits for aviation, as jet fuel is both toxic and flammable. The wingtank entry kit consists of a MultiRAE Plus five-gas monitor with a PID for early warning of VOC vapors, an oxygen level sensor (a low level can impair worker safety and lead to loss of consciousness; a high level raises the risk of explosion), a lower explosive limit sensor, a carbon monoxide sensor and a hydrogen sulfide sensor. The unit’s alarms are set specifically for this application.

Q. Has the company invested in any new technology in the last two years?

A. We continue to explore the application of wireless sensor technology. In the last two years we have introduced both gamma and neutron radiation monitors, a five-gas confined space entry monitor with an automated calibration and charging station called EntryRAE. We have also introduced two information products: PlumeRAE for real-time toxic plume measurement and HazRAE, a database that can be deployed on handheld PDA or personal computers that cross-references more than 6,000 chemical combinations and displays personal protective equipment requirements, volatility, exposure limits and antidotes.

Q. What do you find most challenging in jobs the company has undertaken?

A. I would say the most challenging work is providing public venue protection for such events as the Super Bowl, the World Series and the Presidential Inaugural. The next challenge will be to provide sensor systems to meet the yet-undefined requirements that refineries and chemical plants will have for perimeter monitoring systems.

Q. What are the biggest obstacles to completing work the company undertakes?

A. I’d put this more in the challenge category. That would be understanding all the requirements at the beginning of a project so the appropriate experts can be engaged.

Q. What do you see as your company’s biggest challenge in the next five years?

A. Managing and sustaining our current growth.

Q. What do you see as future trends or opportunities for RAE Systems from events such as long-term weather fluctuations?

A. Events such as the recent Gulf coast hurricanes test the ability of petroleum processors to get their plants up to full operating capacity. These events present opportunities for RAE Systems to provide for worker safety and continuous monitoring.

Q. Any humorous stories from RAE Systems’ years in the business?

A. One afternoon we received a call from a hospital that is located about 90 miles away. Someone had knocked over a canister of anesthesia gas. Anesthesia gas is toxic in high doses as well as presenting the problem of people falling asleep. The hospital had safely evacuated everyone without incident, but no one wanted to be the first one to re-enter the facility to see if it was safe. They called RAE Systems and flew in a helicopter so one of our applications chemists could measure the indoor air and make sure it was safe. Since then we have been involved in four similar events.