Casestudy/19"/mike1st/mark2nd

By ANN DONAHUE

Staff Reporter

Eltron International Inc. used to make hundreds of thousands of printers for creating bar-code labels. It built them fast and sold them cheap, attracting customers like United Parcel Service, Sears Roebuck & Co., Coors Brewing Co., and SmithKline Beecham Clinical Laboratories.

In 1997, the Simi Valley-based company was ranked No. 5 on Forbes magazine's list of the 200 Best Small Companies in America. In 1996 and 1997, it was included in the "Southern California Technology Fast 50," a list of the area's fastest-growing tech firms.

Today, Eltron is not on any list. It does not exist anymore.

It's a scenario played out again and again all over Los Angeles. An ambitious entrepreneur comes up with a viable business concept, launches a company, grows it, takes it public, and then sells it to an out-of-towner.

"It happens all the time," said John Mavredakis, senior managing director at Houlihan Lokey Howard & Zukin. "To be a dominant player in a niche industry is a better investment opportunity from a leveraged-buyout perspective."

In Eltron's case, the buyer was Zebra Technologies Corp. of Vernon Hills, Ill., in a deal that closed last October. Zebra manufactures high-end printers that retail for thousands of dollars. At the other end, a typical Eltron printer sold for as little as $200.

Analysts praised the merger, saying that Eltron's strength in the low-cost sector is a solid complement to Zebra's big-ticket products. They're projecting that the combined company will post 1999 revenues in excess of $320 million.

One executive who witnessed Eltron's growth, acquisition and integration is Hugh Gagnier, who was with Eltron since its initial public offering in 1993.

"As far as the challenges we faced, the biggest was coming up with a strategy that would continue our growth rate," said Gagnier, who is now vice president and general manager of operations at Zebra's new facility in Camarillo. "We were always under the gun because a lot of companies doubted we would be successful."

To keep on track, Eltron made several technological advancements and targeted overseas markets. In 1998, for example, it introduced printers specially designed with fonts for Chinese, Japanese and Korean characters.

At its peak, Eltron had 687 employees worldwide, Gagnier said. Its major distribution center was in England; there was a production factory in France and a sales office in Singapore.

And it pursued an expansion strategy through a series of acquisitions.

In 1994, it purchased the distribution operations of Russet Ltd., a British company in the bar-code business. The next year, it acquired thermal-label manufacturer Donner Media Inc. of Appleton, Wis., for $1.3 million. In 1996, it merged with competitor RJS Inc. of Monrovia in a transaction valued at $12 million.

In October 1996, Zebra signed a letter of intent to acquire Eltron in a stock transaction valued at $680 million, but that deal soon unraveled, apparently over a dispute on who would head the newly merged company, according to insiders.

But talks recommenced a couple of years later, and this time the deal went through. It was the right moment for the two companies to join forces, according to Chris Rezendes, an analyst at Venture Development Corp. in Natick, Mass.

"Certainly the rest of the field was at least one or two steps behind in terms of brand recognition," Rezendes said. "These two were the leaders in revenue growth and they have a significant portion of the talent in terms of upper administration."

The company is now led by CEO Edward Kaplan, who was Zebra's chief before the acquisition. Eltron founder, chairman and CEO Donald K. Skinner is now vice chairman and in charge of Zebra's card printer business.

"I've met both (Kaplan and Skinner)," Rezendes said. "They are both very bright, very quick, very aggressive, no-nonsense leaders. It would not surprise me if they had some difficulties sorting through responsibilities (in 1996), but there also must have been some very legitimate reasons because I can't see two men that successful calling it off just because of ego."

After the initial post-merger adjustment period, analysts seem bullish on Zebra's future.

In February, Standard & Poor's gave a "five star" buy recommendation for Zebra shares, citing benefits from the company's consolidation of the printer component purchasing process.

Eltron, meanwhile, is just a fading memory.

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