Bishop Graphics fell flat on its face last year when it tried to enter the computer business.
The Westlake Village-based company, the leading manufacturer of drafting supplies for designers of printed circuit boards, got the cold shoulder from customers when it tried to sell them costly computers and software. Eventually, Bishop Graphics lost as much as $750,000 on the venture.
Even so, the company is undeterred. Bishop Graphics executives and industry analysts are convinced that the craft of designing printed circuit boards in this country is quickly shifting from the drafting table to the computer screen.
This year, Bishop Graphics is trying to sell another make of computers and software to circuit board designers. But this time the company is going to offer a product that costs less than one-sixteenth of the one that bombed.
The outcome of its effort will go a long way toward deciding whether Bishop Graphics, which has suffered a sharp decline in profits over the last six months, will rise into a booming business or sink into slow growth.
At the same time, it will test the resilience and adaptability of the company and its forceful 55-year-old chairman, Martin J. Salvin.
Until now, Bishop Graphics has lived, for the most part, in a different world from its customers. It has made most of its money manufacturing simple, low-technology materials for sophisticated, high-technology companies.
Specifically, it makes plastic patterns, known as drafting symbols, and adhesive-backed tapes that designers of printed circuit boards lay on film to create preliminary blueprints for new boards. Printed circuit boards hold electrical components and have circuitry etched onto them.
Designing circuit boards by hand, however, is going the way of the dinosaur. Designers who once used razor blades and tweezers are now turning to computers to make their drafts, performing their jobs more quickly and precisely.
Consequently, analysts agree that Salvin's decision to steer Bishop Graphics into the computer business is a good one. The key question is whether Bishop Graphics, which reported sales of nearly $15 million last year, can make that strategy work.
"The jury is out," said Frank Wisneski, a senior vice president with Wellington Management Co., a Boston-based mutual fund firm.
Wisneski said the recent price of the company's stock, which is traded over the counter and closed Monday at $4.25, down 75 cents, indicates that the stock market is not yet sold on Bishop Graphics' plans. In June, 1983, the stock hovered near $15. Even so, Wisneski and some other analysts regard the company as financially strong and are optimistic about its prospects.
"They know where the designers are," Wisneski said. "That's where their advantage is. They have an exposure and a reputation there."
If the entrance into the computer and software business succeeds for Bishop Graphics, the rewards could be immense. Salvin estimates that annual sales of personal computers and software for designing printed circuit boards will grow to more than $500 million by 1990.
Losing Out to CAD Industry
The U.S. market for the sort of low-cost supplies that Bishop Graphics and its competitors now sell, Salvin said, amounts to only $20 million to $25 million a year.
Salvin said the business that his company now is losing to the so-called CAD, or computer-aided design, industry is minor "compared to the millions, if not billions, of dollars that will be spent over the next 10 or 20 years on CAD-related products."
"We didn't just want to wither away and be in the buggy whip business. We wanted to be in that market," Salvin said.
Although the failure of Bishop Graphics' last foray into the computer-aided design business cost the company time, analysts say it was not a critical blow. But another flop would put Bishop Graphics further behind.
"If they want to grow at a rapid rate, they've got to get into this business," Wisneski said. For now, Wisneski said, Bishop Graphics' expanding overseas sales are offsetting the declining demand for its traditional products in this country.
Joseph Garipoli, an analyst with the Herzog, Heine, Geduld brokerage firm in New York, said Bishop Graphics appears to have learned from its past failure in selling computers. Last time, it put together a system--the actual components were made by other manufacturers--that it sold for about $75,000, a price too high for the company's traditional customers.
Garipoli said the designers and engineers who have bought Bishop Graphics' products normally do not have the authority from their companies to spend that much money.
This time, Bishop Graphics is offering a less-sophisticated package costing $4,000 to $4,500 that combines an Apple Macintosh computer with software written by Chad Pennebaker, president of a San Leandro circuit board firm.