Richardson started 'in the trailing edge'

September 5, 2005

BY MICHAEL KRAUSS

This Labor Day, Ed Richardson, the 63-year-old CEO of LaFox, Ill.-based Richardson Electronics deserves a well-earned rest. Instead, he'll be chaperoning a two-day campout for Boy Scouts at his wildlife foundation. It's typical of Richardson, who is an industrious, successful and unlikely tech entrepreneur.

Growing up in far west suburban Wayne, Richardson set out to be a veterinarian. While studying at Iowa State, he came down with mononucleosis and went home to recuperate. His father, Arthur urged him to drop out of school and join the family electronics distributorship. That was back in 1961.

"We started in the trailing edge of technology," says Richardson, whose father launched the company as an RCA vacuum tube distributor in 1947. While others fled aging vacuum tube technology, Arthur saw riches. He doubted vacuum tube technology would vanish altogether.

He was right, though he didn't live to see his vision realized.

$500 million-plus in sales

When he died in 1979, the company was $12 million in revenues. "When we got into vacuum tubes, people said we were crazy," Ed Richardson said. Today, sales exceed half a billion dollars.

Ironically, Arthur Richardson's vision led to a Department of Justice antitrust suit in 1989. "They felt we had too large a share," his son says.

Out of necessity, Ed Richardson diversified. Today, he makes power tubes that keep television stations on the air. He creates custom display terminals for New York Stock Exchange traders. He manufactures signal amplifiers for cell phones. If you drive a Mercedes, a Richardson amplifier boosts your cell-phone signal to avoid dropped calls. Richardson recently launched a retail version of the signal amplifier he hopes to sell through Radio Shack and Best Buy.

To build those engineered solutions, Richardson employs 250 electrical engineers among his 1,200 employees with offices in 70 countries. "I sort of laugh," the college drop-out says. "The prerequisite to come to work here today is an MBA or an engineering degree."

Richardson recently returned from an 11-day swing through China, Japan, Taiwan and Korea. Sales in China have grown 65 percent annually for the past five years. On Aug. 26, Richardson announced record sales of $578.7 million for the year ended May 28, up 11 percent from 2004. The stock of the publicly held company (RELL) closed Friday at $7.68, unchanged. It has traded between $11.76 and $6.55 in the last 12 months.

Yet, it's been a frustrating year for Richardson. He's in the midst of a restructuring brought about by Sarbanes Oxley compliance and the fallout from Enron.

Despite booming product demand, Richardson delivered a loss of $11.3 million for the year after reporting net income of $6 million last year. "Although it looks like a huge loss, it has no cash impact," he says.

Richardson had $13.1 million in deferred tax assets reversed off his books. "Our auditor questioned our ability to use those losses going forward based on current company performance," Richardson says. "That combined with $2.4 million worth of expense to comply with Sarbanes Oxley and another $1 million in fees to accounting companies for the restatement are the major reasons for the loss."

Richardson isn't the only mid-size company lamenting the costs of regulatory compliance. The American Electronics Association has been beating the drum on this issue for months.

Richardson is enthusiastic about the business, but he adds, "I don't think the government really understands the handicap in costs they've put on small companies."

That's something worth considering around the campfire this Labor Day weekend.

Chicago-style entrepreneurship

More evidence of a Chicago School of Entrepreneurship. Northwestern University professor Steven Rogers reports that the University of Illinois at Chicago, DePaul University and Northwestern are burgeoning bastions of entrepreneurship. All three were named to the top 20 list of entrepreneurship programs by Entrepreneur magazine. Leaders of NanoInk, Nanosphere and Performics emerged from Northwestern.

Bits & bytes

Watch for Motorola and Apple Computer to unveil the long-anticipated iTunes mobile phone Wednesday. ... Marcy Dockery joins Burson-Marsteller as director of its U.S. Technology Practice based here. Dockery is a Silicon Valley veteran who worked with Apple, Google, Plaxo and WebTV Networks.

Michael Krauss is a Chicago area tech writer and consultant.

 

 

 ©2005 Marion Consulting Partners