Back from brink, Tek looks ahead

Electronic News, Sept 2, 1996 by Cynthia Bournellis

Palo Alto, Calif.--Six years ago in the "Silicon Forest" of Wilsonville, Ore., Tektronix CEO Jerry Meyer and his merry recruits--many of whom he robbed from Silicon Valley--began the uphill battle to save the company from near bankruptcy.

Said Mr. Meyer, the former CEO of Honeywell: "When I joined Tektronix in 1990, the company had only two weeks worth of payroll in the bank." Not to mention that sales were flat, net income was steadily declining and the stock was trading at an all-time low. The problem: Tek's culture was stifling the company.

"We had a culture of entitlement...and our culture didn't want to grow. So, we had to condition the employees that life had to change," said Mr. Meyer. Along with that, Tek had its fingers in too many pies. The company was scattered into six businesses, ranging from cable analysis tools to semiconductor test equipment to computer workstations.

The past six years have been a grueling turnaround job. "The industry calls this (turnaround) re-engineering. We just called it survival," said Mr. Meyer. The first plan of business: get expenses under control and identify unprofitable businesses. "We called them the left-and-right businesses," said Tektronix CFO Carl Neun. "We had a meeting in which we actually wrote down (on a chalk board) the businesses we wanted to be in on the right side of the board and those we didn't want to be in on the left side of the board," recalled Mr. Neun, who was recruited from Conner Peripherals in 1993.

After its first phase of restructuring was accomplished in June of 1993, Tek charged off a $55 million dollar loss for the fiscal year on sales of $1.3 billion. Then, after a number of spinoffs, acquisitions, joint ventures, public offerings of new companies and management shakeouts, Tek's revenues and profits steadily rose. The company is now more streamlined and consists of three core businesses: measurement, color printing/imaging and video/networking. Tek has also been given a "buy" rating from J.P. Morgan Securities, which has set a six- to 12-month target price of $50 per share. Tek has also successfully modernized its offerings to having 67 percent of its 1996 revenues coming from products introduced within the last two years.

Over the past five years, Mr. Meyer has continued to cut the fat out of management, while attracting new talent to Tek. In addition to the first round of Silicon Valley execs who joined Tek during the early '90s--including senior executive John Karalis, who was a VP and general counsel at Apple Computer; Deborah Coleman, a former Apple manufacturing executive who took over Tek's board manufacturing operations and now heads Merix Corp., a Tek spinoff; and former IBMer Lucie Fjeldstad, who is now president of Tek's video and networking division--recent hires include Claude Balleyguier (ex-Schlumberger and Sony), who will head up Tek's European operations.

Tek's initial success began in 1946, when founder Howard Vollum developed a way to measure and display high-speed electrical signals. Tek's recognition as a major player in this area came soon after the introduction of its first commercial product, the 511 oscilloscope. Sales from measurement products accounted for 45 percent of Tek's revenues of $1.8 billion for fiscal 1996, which ended in May. Tek's current focus is on the digital convergence trend. The company this week is releasing a new line of low-cost digital oscilloscopes (see story, page 26).

Tektronix is also best known for its color printers and imaging products, which represent 31 percent of the company's revenues. A major coup for the printer division may very well be Tek's proprietary Phase Change technology, an innovation that Mr. Meyer said will help Tek compete in the low-end laser printer market.

Here's how Phase Change works: Ink comes in the form of crayon-like sticks. The solid ink is heated and jetted onto the paper, where it solidifies. Next week, Tek will release a new network color solid ink printer that will be priced well below market expectations it was said.

Tek will also ship its first integrated editing system, Lightworks V.I.P., later this year. V.I.P. is the first integrated product as a result of Tek's acquisition last year of Lightworks, an English company that makes nonlinear editing systems.

Probably the true star from the video/networking division is Tek's Profile Video Disk Recorder, an intelligent disk storage array that lets the user in a studio simultaneously play back, edit and transmit off the same recorder. The immediate application is for live TV events and broadcast news. While Profile isn't the only nonlinear game in town--companies like Avid and Discreet Logic offer turnkey systems for nonlinear editing--it might be the most cost-effective.

"The real magic Tektronix devised with Profile is to offer nonlinear editing as an open intelligent peripheral attaching to a variety of hardware and software platforms, and visibility to the user via an interface that looks like a simple console," said J.P. Morgan analyst Daniel Kunstler. Mr. Meyer said Tek is repositioning the new version of Profile in order to attack the very large installed base dominated by Panasonic.