Buyout Threat Helps Turn Firm Around
IT is an age-old corporate tale. Aesop might have titled it ``the aggressive investor and the turnaround.''
As companies begin convening their annual shareholder meetings, Tektronix Inc. is telling its own version of this story. The investor is George Soros, recently famous because of troubles in the arcane ``hedge fund'' industry he pioneered. In the fall of 1992, Mr. Soros set his sights on Tektronix as an underperforming company, taking a 14 percent ownership stake.
The threat of a takeover lit a fire under the Wilsonville, Ore., maker of electronic equipment, which was already trying to restructure. The two sides agreed to an 18-month ``standstill,'' buying time for the company to transform its operations.
Now, a month after the deal's expiration, the profit picture and stock price have recovered to the point where a takeover appears unlikely. The Soros Group's stake has almost doubled in value.
Jerome Meyer, chief executive officer of Tektronix, is not waiting until the company's unusually late annual meeting (held in September each year) to spread the good news. ``The turnaround is happening,'' Mr. Meyer told the Monitor during a visit to Seattle. ``I don't lose any sleep. We've got management that is disciplined [and] that knows how to grow.''
``You have to give Meyer a lot of credit'' for refocusing the company on its core businesses, says Bob Toomey, an analyst with the Piper, Jaffray investment house in Seattle. Meyer was hired from Honeywell Corporation to head Tektronix in 1990, when the company was mired in cash-flow troubles.
Tektronix has always been strong in technology, but had done poorly on commercializing the technology quickly enough to pay off in its fast-changing markets, says analyst Rick Owens of Pacific Crest Securities in Portland, Ore. Now, products less than two years old account for one-half of company revenues, up from 22 percent in 1991. The company has had six consecutive quarters of year-over-year profit growth. Analysts attribute Tektronix's progress to Meyer's efforts, but also to pressure from Soros.
``I don't think it's coincidence that this company has more new products in this six-month period'' than ever before, Mr. Owens says. The firm needs to keep that momentum going, he adds.
Meyer's key initiatives include:
* Focusing Tektronix on its technology strengths, and contracting out as much work as possible to suppliers - a big shift for a company with a tradition of vertically integrated production. Product lines are divided into three key areas: computer graphics, including color printers; television production equipment; and test and measurement equipment.
* Reducing the number of suppliers and parts bought, which seems paradoxical as reliance on ``outsourcing'' grows. Meyer explains that he wants close ties to suppliers and products made of simple, industry-standard parts.
* Abandoning less-profitable markets for ones in which Tektronix can be a leader. The company sold a semiconductor operation and is spinning off a majority stake in a circuit-board plant, because that $80 million business is not essential.
``We've got a lot of work to do,'' Meyer says.
One question is how well the company will capitalize on its position as a leader in high-performance color computer printers. Meyer predicts that more users will be moving from black-and-white to color printers. ``They [Tektronix] are clearly a dominant player in that market,'' Owens says, though competition is likely to get stronger. Hewlett-Packard, for example, is a big seller of low-end color printers.
Another market opportunity is the ``information superhighway,'' on which phone and cable-TV companies are likely to spend billions of dollars a year. Tektronix makes products for testing fiber-optic cables and transmitting video signals.