Now the company believes it will be profitable as soon as the fourth quarter and throughout next year, although the commercial and military markets aren't expected to be fully recovered until 2005. For E&S overall, market share is growing, but market size is not.

"A lot of the cutbacks have been focused in the military area, and those two in general are where a lot of the problems have come from, but we expect that to turn up in 2005," Oyler said. "We don't expect a big upturn in purchasing from either the airlines or the military until 2005, but it will turn up. It's just a matter of being positioned, bringing out the new products and keeping the costs down until the upturn comes."

Other business sectors are even more promising. The company's planetarium business nearly tripled this year, and strategic visualization — used by ABC television to show Baghdad and other locales during the Iraq conflict — is growing rapidly. Deliveries of a new product, a laser projector, will start next year.

"All three of these, especially strategic visualization and the laser projector, have enormous potential — the potential to make the company more profitable than it has ever been in its history," Oyler said.

Analysts see promise there, also. And huge growth in those three sectors may leave simulation — now about 90 percent of E&S — closer to 50 percent in a few years, Oyler said.

Obstacles that could derail the company's comeback are lagging markets and technical issues that could delay product rollouts. "But the risk is in the timing of the upturn and not so much, at this point, in the technology," Oyler said.

Cautious optimism

Adam Hutt, general partner/investment manager for Leviticus Partners LP, a New York investment partnership, believes E&S has turned a corner.

"E&S fits into the criteria I look for in an investment: A company has to have long operating history — a real pedigree — new products coming out, be in a decent financial position and can't have a lot of debt. You get everything on one package, without a lot of risk. And E&S clearly has a chance to take advantage of numerous growth opportunities," said Hutt, who owns some E&S stock.

"E&S has been around a long time and, as far as I can tell, the quality of their products are right up there. They have a terrific reputation in their circles. They've been struggling to get their costs down, evidenced by the most recent round of (job) cuts. But I think they're on track for profit in the next few quarters. Once they do that, they'll be in great shape."

He believes E&S technology has value, and he has heard some good industry buzz about the laser-based simulation system.