Crimson’s Tide Sends Holdings Overseas to Boost Market Share
WALL STREET WEST
John-Paul Ho, founder of investment firm Crimson Capital, wants to keep businesses in the U.S., which is why he says he’s moved so many of them to China, Taiwan and the Philippines.
“The whole idea is to use the cost structure overseas to maintain your competitive position and take market share,” said Ho, who founded Crimson, a $600 million private equity firm in Palo Alto, in 1993.
Crimson is searching for Los Angeles companies that need to move their manufacturing operations offshore to remain competitive, but don’t have the know-how to do it.
Among the industries that are making the move: Medical equipment makers, aerospace, high-precision engineering, specialty chemicals and plastics and automotive manufacturers.
Crimson created a philosophy for moving offshore based on the actions of major PC manufacturers Dell Inc., International Business Machines Corp. and Hewlett-Packard Co., which moved their manufacturing operations overseas in the 1980s and were able to keep Japanese competitors at bay. Meanwhile, those companies dominate in the U.S. by maintaining marketing, sales and product design teams, as well as their enormous market capitalizations, at home.
“What’s happening now is that the multi-national corporations have made money, they are using China as an export platform, so they are telling U.S. suppliers either to get to China or they will switch to a competitor,” said Ho. “That’s why there’s this tremendous pressure to go offshore. If you don’t get out there in five years, a Chinese company will get up and take the business from you.”
Crimson recently sold its stake in SPI Technologies Inc. of Pasadena, a business processing and outsourcing company that, among other things, does legal transcriptions for the Department of Justice through its offshore operations in the Philippines and India. The private equity firm maintains a stake in eTelecare International of Pasadena, which has call centers in the Philippines.
Steve Dollinger, a partner at Crimson and former director at Deutsche Bank Capital Partners, said the best setup for a company is to have a management team in the United States and elements of its manufacturing in Taiwan or China.
“We get calls all the time from companies that say they have to do something overseas but they don’t know how,” said Dollinger. “If you’re sitting there making some product and you think you’re impervious to competition from overseas, you’ve got your head in the sand.”
Kate Berry
Will It Stick?
Stamps.com Inc. executives are big believers in the stock, but the Santa Monica-based online postage company has also attracted some detractors in recent weeks.
Between July 15 and Aug. 15, short interest in Stamps.com surged by 89.3 percent, one of the highest increases among Nasdaq stocks.
On Aug. 16, a Street.com columnist, Hal Uy, recommended shorting the stock after determining the company’s personalized postage stamps, which allow users to put their own photos on letters, were a “novelty.”
Even so, Stamps.com’s stock has risen sharply, to $14.01 on Aug. 26 from $9.83 on July 14.
The personalized stamps, now in a trial that runs through September, are being evaluated by the U.S. Postal Service for demand as well as security and the way Stamps.com and the Postal Service handle their processing.
“We feel that if we’re able to show all those things to the Postal Service we’ll have similar results to what we’ve had before, and get full approval near the end of the test process,” said Stamps.com Chief Executive Ken McBride.
Recently, Stamps.com insiders have purchased more than $2 million in company stock, according to Thomson Financial.
Most came from Kevin Douglas, a board member who also heads Douglas Telecommunications Inc. in San Rafael. Douglas purchased 177,500 shares valued at just under $2 million, bringing his total stake to 1.6 million shares.
McBride said Douglas “feels good about the future of the company and wants to add to his position.”
Anthony Palazzo
