Daniel Greenberg, chairman and chief executive of Electro Rent Corp. describes the last seven years of his business life as “a long painful trip through the desert.”

The Van Nuys-based company went from 935 employees in 1998 to just 250 workers today. During the “seven-year drought,” as he calls it, revenue plummeted below $100 million, from $300 million.

With 38 years in the business, Greenberg managed to keep Electro Rent afloat even as its primary business of renting and leasing personal computers was drying up.

When computer prices began falling in the late 1990s, the items became more of a commodity. Then the economy weakened, and companies began cutting their capital expense budgets.

Demand for rental and lease equipment fell drastically, reaching historic lows for the company in 2001 and 2002

To survive, Electro Rent sold its inventory and returned to its roots supplying testing and measurement equipment to top U.S. aerospace and defense firms. Now with the defense industry roaring back to life, the company has thrown off sharp earnings increases in each of the past four quarters.

“Their business has recently turned in the last few months and defense is one of the big drivers for them,” said David Gold, an analyst with Sidoti & Co. in New York.

Electro Rent reported a 138 percent jump in second-quarter net income, to $6.2 million for the period ended Nov. 30, from $2.7 million for the like period a year earlier. Revenue rose 13 percent, to $21 million.

Despite the recent successes, Greenberg says he laments the effect job cuts have had on the firm’s employees. He and his family are large shareholders, owning nearly 17 percent of Electro Rent’s stock. (His father and uncle had started the company’s predecessor business in the 1950s. Greenberg, who is a lawyer by trade, joined the firm in 1967.)

“Sadly enough, people got hurt here,” Greenberg said of the nearly 700 workers who lost their jobs. “I hope all the employees who were not able to stay with the company knew we took an honest and best shot at trying to do it fairly.”

In just over a year, Electro Rent’s stock price has risen nearly 60 percent to $14.18 at the Feb. 9 close, from $8.88 on Jan. 22, 2004. Gold said he thinks Electro Rent stock will hit $20 a share in the next year.

Northrop Grumman Corp. and Lockheed Martin Corp. are among the company’s biggest customers. As defense companies develop new products, weapons and systems to fight the wars in Iraq and Afghanistan, they increasingly require testing and measurement equipment to ensure their products work.

Defense contractors are required by law to measure the electronic responses of all products they build, so every component of joint-strike fighter planes or new radar systems commissioned by the Defense Department has to be tested. Electro Rent provides the electronic measurement and testing equipment, most of which is manufactured by Hewlett-Packard Corp. and Agilent Technologies Inc.

In addition to the defense industry, the company is getting more orders from wireless and telecom providers that use testing and measuring equipment for servers and cell phones.

Craig Jones, Electro Rent’s vice president and chief financial officer, said the company has become more efficient by cutting the number of its facilities to 14, down from a high of 38. “We’re revenue-starved at this point,” he said, noting that a 20 percent increase in revenue can be accommodated without adding any additional infrastructure.

Last year, Electro Rent was sitting on roughly $100 million in cash when it began searching for acquisitions. Nothing panned out so the board took advantage of tax laws by paying a one-time, $4 per share special dividend to shareholders. Greenberg received roughly $17 million.

“I think people thought the dividend was favorable because the company was sitting on the money and instead of going out and doing something stupid, they gave it to shareholders,” said Gold.

For the first six months of fiscal 2005, 76 percent of total revenue has come from testing and measurement equipment and the remainder from personal computer-related equipment.

Staff reporter Kate Berry can be reached at (323) 549-5225, ext. 228, or at

[email protected]

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