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Expansion Plans Hit Snag : Legal Sparks Fly, but Powertec Chief Is Upbeat

February 20, 1986|JAMES BATES | Times Staff Writer

Powertec's expansion plans have been given a jolt, but that doesn't seem to faze Emmett H. Bradley.

Three months ago, the Chatsworth company's president and chief executive appeared to have a friendly agreement to buy the assets of Semiconductor Circuits of Windham, N. H., a deal intended to play a key role in Powertec's plan to increase its sales of power supply equipment. But the deal turned ugly in January when both sides sued each other in a dispute mainly over how much Powertec is supposed to pay.

Powertec also has been troubled by the slowdown in the electronics industry, a slump that last year stalled its steady rise in sales and profits.

Lofty Goals

Nevertheless, Bradley predicts that increased demand from manufacturers of computers, telecommunications equipment and medical equipment will raise sales from $22 million in Powertec's fiscal year ended Oct. 31 to about $80 million in four years.

"We're in a rapidly expanding market, and we plan to grow as fast as, or faster than, that market," Bradley said.

Powertec's products take the alternating current that flows out of wall outlets and turns it into direct current tailored to the wattage and voltage levels needed to power mini-computers and other sophisticated electronic equipment. The company's power supplies are packed into metal cases about the size of a shoe box.

Switching Power Supplies

Most of Powertec's efforts are going into building so-called switching power supplies, which became commercially feasible in the mid-1970s and which are quickly replacing the linear power supplies that have been widely used.

Unlike the linear devices, the switching power supplies convert electricity to a very high frequency, which makes it possible to use much smaller magnetic components in the product. As a result, the switching devices are more efficient, smaller, cheaper and cooler than linear power supplies.

Until last year, Powertec expanded rapidly in tandem with the success of the computer industry. In the 1984 fiscal year, sales increased 48% to $22 million and net income rose 59% to $2.5 million. In 1985, the company was picked as one of Forbes magazine's "200 Best Small Companies in America," based on its return on equity, steady earnings growth and strong balance sheet.

But flat sales and earnings made 1985 a frustrating year for Powertec. Based on early orders this year, however, Powertec and its counterparts are confident that business is improving.

"Most power supply companies are seeing an upturn. I would say you'll have to give us another two to three months before we know. I'm very bullish," said Lawrence Lee, president of LH Research, a Tustin-based competitor of Powertec.

'Flash in the Pan?'

Bradley said he is "getting signs that the market is strengthening. The question is whether it's a flash in the pan."

Bradley, 58, a soft-spoken Virginian with a master's degree in electrical engineering from the Massachusetts Institute of Technology, said he once contemplated saving souls as a minister instead of selling power supplies to computer makers.

Business Trip as Vacation

During a typical week, Bradley spends five days in his office and a sixth working at home using his personal computer. He says his ideal vacation is going away on a business trip.

Analysts say Bradley runs a lean operation. The executive staff, for example, consists only of Bradley and four vice presidents, one each for marketing, manufacturing, finance and engineering.

Powertec, which employs 300 people, sells to such companies as Apollo Computer, Prime Computer and Gould's Computer Systems Division. It has set its sights this year on getting Digital Equipment, one of the leading makers of mini-computers, as a customer.

John Salzer, a Santa Monica-based consultant to electronics companies, estimates the domestic market for the power switching devices was $2.8 billion last year.

But only about one-third of the market was grabbed by independent power supply firms such as Powertec. The rest was taken by electronics equipment manufacturers that installed their own power supplies in their products.

$6.1-Billion Market Possible

Salzer estimates that the market will grow to $6.1 billion in five years, and that independents will increase their share to about 45% because more computer makers want to contract out the work.

Makers of power supply devices, unlike many other electronics companies, do not appear to be seriously threatened by foreign competition. Consultants say foreign firms haven't been interested in the business for several reasons, including the relatively small market for independent firms and the difficulty in mass-producing the products because they sometimes need to be tailored to individual customers.

"I would say they aren't insulated from foreign competition, but they're not in the first line of the battle," Salzer said.

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