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Maxwell Technologies' New Wings : Small Firm Learns to Soar Post-Cold War


SAN DIEGO — The metamorphosis to free market warrior has proven an illusive goal for many San Diego defense contractors long accustomed to feeding at the government trough.

But a once-sleepy little company called Maxwell Technologies is showing how "defense conversion" can be done. After a four-year identity crisis, Maxwell this year has reduced government contracts to 30% of sales, down from 100% in 1992, and, for the first time since the Cold War ended, is reporting sales, profit and job gains. Maxwell's stock has also zoomed.

Maxwell makes ultracapacitors--devices that store and then discharge enormous amounts of electrical energy. During the U.S. defense buildup of the 1980s, scientists used Maxwell's devices to simulate nuclear explosions, the proposed "Star Wars" satellite defense system and mock-ups of the Pentagon's so-called rail gun, or super cannon.

But the end of the Cold War rendered much of the company's technology useless--or so many inside and outside the company thought. Maxwell's low point came last year when it lost $15 million on $80 million in sales after writing off the value of worthless defense-related assets.

Then in April, Maxwell hired Ken Potashner as its chief executive. Potashner is a turnaround specialist credited with helping to raise San Jose-based disk drive manufacturer Conner Peripherals from the dead.

Upon arriving, Potashner, 39, told Maxwell's staff to find commercial markets for "high-energy storage and discharge" applications. Previous Maxwell managers made similar mandates, but Potashner increased accountability and added incentives by giving stock options to each employee and performance bonuses to managers.

Potential ultracapacitor markets were soon identified in automotive, utilities and telecommunications firms, and Maxwell proceeded to sign partnerships with major companies to develop products. Among them: a $4.5-million deal with an unnamed "international" auto maker considering capacitors for use in an electric car. Potashner says he can't name that company or some other customers who demand confidentiality.

The company subsequently signed a $1-million deal with Pacificorp, the Oregon utility, to make energy storage device prototypes and another contract to sell 1.1 million capacitors to a manufacturer of portable telecommunications devices. (Potashner won't identify the buyer.)

Analysts predict Maxwell's revenue will exceed $100 million for the current fiscal year, the best since 1992. A $3-million profit is projected, and payroll is up to 620 workers from 500 a year ago. Wall Street is paying attention: Maxwell's stock closed Wednesday at $19.25 on Nasdaq--down from a recent peak of $25.75 but up from $3.25 last April.

Frederick Lacy, a stock analyst with Hagerty, Stewart & Associates of Newport Beach, said the company's market-driven approach has made all the difference: "In the past, as long as government contracts were coming in, there was no incentive to go out and market. Why get your hands dirty if you have a juicy cost-plus-5% contract?"


The difficulty that San Diego County's laid-off defense workers have had finding new jobs is reflected in the statistic that the average enrollee in job-training programs here has needed 14 to 16 months to find work, according to the San Diego Consortium and Private Industry Council, which managed $7.9 million in job-training grants last year.

Of the 4,800 idled defense workers who enrolled in San Diego County training programs last year, 2,107 found new jobs.

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