Lightware turns to internet, then foreign buyer
Portland Business Journal - by Aliza Earnshaw
Just three years ago, Lightware, a homegrown maker of lightweight business projectors, faced a real problem: how to survive and build sales in a market crowded with large competitors.
Lightware's solution--a move from selling through a network of audiovisual equipment dealers to selling direct, mostly via the internet--worked so well that Lightware made itself an attractive acquisition target. Now the company is part of PLUS Vision Corp. of America, a projector sales and marketing subsidiary of $1.5-billion PLUS Corp. of Japan. And since Lightware sold its engineering group to glass technology giant Corning in late 2000, Lightware-branded projectors have been designed and manufactured by PLUS.
Though the relinquishment of its identity as a projector maker may not have been what Lightware's founders originally had in mind, the merger into a much larger entity was "the next natural phase," said Mark Hand, formerly CEO of Lightware and now vice president of sales and marketing for PLUS Vision Corp. of America.
"The merger is advantageous to Lightware," he said. "We will have double or triple the revenue potential we had, right off the bat."
When PLUS Corp. of Japan first came calling in 2000, Lightware was quite willing to listen to its would-be suitor. And perhaps it's not surprising. Though the small Portland projector company, founded in 1995, had just struggled back from losses to profitability, it remained a small player, with less than 1 percent market share, in a field that is becoming more competitive than ever.
"The projector industry has been rife with consolidation for some time," said Eric Haruki, a manager at research firm IDC. Locally, InFocus exemplified the trend when in 2000 it purchased Proxima, which had already merged with Norwegian company ASK. InFocus is now at the top of Haruki's top-10 list of projector makers selling in the U.S., with large companies like Epson, NEC, Sony and Sharp following right behind.
But the projector market is going through another shift. "We're seeing further expansion of brands, with several Taiwanese companies coming on line," Haruki said. Some of these companies not only sell their own brands, but also manufacture projectors for sale to computer companies, which then market them under their own brands. "And a lot of mainland Chinese projectors are coming on line, too," Haruki said.
In this rapidly changing and hotly competitive environment, Lightware distinguished itself by designing and making small, affordable business projectors. Lightware's ambitious founders were InFocus veterans who wanted to concentrate on portability, and broke away from InFocus in order to do so. The company achieved a series of industry "firsts"--the first business projector under 10 pounds, first under five pounds, the first business projectors under $1,500--and gained traction with customers who favored low pricing and customer service over a brand name.
Genentech Inc. is one such customer. Marguerite Neubauer, who is in charge of purchasing projectors for the company's field sales force, said that she compared prices and features carefully before choosing Lightware's small projectors. But it was the performance of the projectors, their ease of use by non-technical sales people, and the company's high level of customer service that persuaded her to buy more Lightware projectors.
The compact, lightweight form of the projectors, and the fact that they are "plug and play"--no training necessary before use--have also persuaded others to buy from the company. "Everyone looks at it," when Genentech salespeople use a Lightware projector, Neubauer said. "They say, `Oh, my gosh, where did you get this from?'"
But loyal customers were not enough to help Lightware gain market share in the traditional dealer channel. The company's competitive pricing was an advantage to customers, but Lightware projectors were getting short shrift from audiovisual dealers. "Dealers will educate the public to buy products with margin," said Hand. "That's why they all sell projectors with 1,000 lumens [a measure of light] and more."
Lightware's board of directors decided to change the sales model, and asked one of the company's original founders and former finance officer, Al Patz, to come back and help guide Lightware back to profitability. "They decided to move from reps to the direct model," said Patz, "and they got the internet channel built." While Lightware retained ties with a few dealers, soon about 80 percent of sales were coming from the company's web site, either directly or by phone calls placed after viewing the site.
The new sales strategy improved Lightware's fortunes. From sales of $23 million in 1998, sales in 1999 had declined to $19 million, but climbed again to $20 million in 2000. The next year was still better, at $26 million. In the middle of 2001, the company also began selling through internet retailers such as TigerDirect, Micro Warehouse and CDW, which now provide 10 percent of the company's sales.
It was late in 2000 that Lightware was acquired by PLUS Corp. of Japan, for an undisclosed price. It was not the engineering and design side of Lightware that interested PLUS, but the strong sales channel that the company had built for itself.
PLUS, which manufactures and sells a wide range of office technology equipment, was looking for new markets outside its traditional scope. "We could either start from scratch or look to acquire someone that had a unique and different market," said Tom Oishi, president and CEO of PLUS Vision Corp. of America. "It was essentially a `make or buy' decision."
Lightware had brought itself "as close to the customer as possible," said Oishi, which "provided PLUS with real market research and product feedback. We were not getting this true, unfiltered information from our dealers." PLUS also liked Lightware's loyal customer base--50 percent of Lightware's sales come from existing customers or referrals--and the fact that the company had established itself in the education and government markets.
"Ultimately, the decision [to buy Lightware's sales operation] was an easy one," said Oishi. Those close to Lightware say it was an easy decision because the deal that PLUS struck was very favorable--for PLUS.
While those observers agree that the purchase was the best available exit strategy for the investors, some feel that the company's full value was not realized in the undisclosed purchase price. "PLUS got a great deal," said Doug O'Brien, one of Lightware's original shareholders and now owner of Projectus, a dealer and installer of audiovisual equipment.
Patz concurs. "They got a channel they would have had to spend a lot more money to develop themselves," he said. But Patz also pointed out that, at the time of the merger itself, there were no layoffs at Lightware--though the group has since shrunk from 35 to 22.
"What you look for in a merger is a match where you minimize the impact on people," said Patz. "I saw PLUS as an opportunity for everyone to gain from it--the shareholders, PLUS and Lightware itself."
IDC analyst Haruki also feels the merger was a benefit to Lightware. "The company was plugging along with cheap, portable [product forms]," he said. "This [PLUS merger] gives Lightware more brand equity and more technological credibility." And in a crowded marketplace, consolidation with PLUS may well have been the only way to assure Lightware's survival.
Contact Aliza Earnshaw at 503-219-3433 or by email at aearnshaw@bizjournals.com.
Latest News |
Most Viewed Stories |
Most Emailed Stories |
