Richard Drysdale says he should write a book about everything that’s happened to his Westlake Village company, Bishop Graphics. Given Bishop’s track record, it would not be another “In Search of Excellence.”
“This is a textbook example of everything that could go wrong with a company,” said Drysdale, who became Bishop’s president in August, 1986.
In the last two years, seven employees sued Bishop for wrongful termination and sought damages of more than $20 million. It was a threat big enough to spur Bishop’s accountant, Arthur Andersen & Co., to qualify its audit until the lawsuits are settled.
Also named in the suits is Drysdale’s predecessor, Martin J. Salvin. In July, 1986, the board of directors fired Salvin, but he still walked out the door with a severance agreement of more than $500,000.
Meanwhile, Bishop’s sales fell almost 20% between 1984 and 1986, while the company swung from a $1 million profit in 1984 to a loss of $538,000, or 23 cents a share, in fiscal 1986. The loss would have been double that had it not been for sizable tax write-offs.
The problems are continuing. Through the first nine months of 1987, Bishop has lost $497,000 more on sales of $7.28 million. Not surprisingly, its stock has fallen from a 1983 high of $24.25 to $2.25 on Monday.
Bishop’s problems stem from its failure to react to the computerization of its industry.
Bishop supplies engineers and draftsmen with the materials they need to design circuit boards, the plates of wires and connectors that power everything from television sets to space vehicles.
To design a circuit board, draftsmen once relied on a blueprint with paper, as well as tape and symbols that would show where wires and connectors go. It worked much like a dress pattern. Bishop makes and sells the tapes and symbols.
But a couple of years ago, it became possible to design a circuit board on a computer. Bishop’s executives, including Salvin, thought computer-aided design, or CAD, was a fad--or so says Salvin’s replacement, Drysdale.
Computer-aided design was anything but a fad. By 1986, companies offering the software used to design circuit boards sold $651 million worth of products, according to Dataquest, a marketing research firm in San Jose. By 1991, Dataquest projects revenue for CAD companies of $916 million.
“The heart of our business was being replaced much more rapidly than the company thought it would,” said Drysdale.
By the time Bishop decided to sell CAD software last year, rival California companies, including Personal CAD Systems in San Jose and PRO.LIB in Sunnyvale, already had established reputations.
20% of Clients Lost
Drysdale, 56, said the company has lost at least 20% of its clients, but he says that situation is only temporary. “We have a number of customers who write us every week saying they wish they could buy from us,” he said.
In the past year, Drysdale has worked to make Bishop a cleaner, tighter ship. Of course it has to be--the company’s excess cash flow for the first nine months of fiscal 1987 was a paltry $12,000.
Drysdale has tried to get the company moving in the right direction. He has eliminated 25 jobs, settled five of the seven lawsuits for $150,000, written down $75,000 worth of obsolete inventory and renegotiated more favorable contracts with suppliers. He says he intends to trim the number of worldwide brokers selling Bishop’s products, and he has arranged for some of Bishop’s operations to move into less expensive rental space.
Before taking over Bishop, Drysdale spent 10 years as president of several venture capital firms, earning a good reputation for planning and making acquisitions. For his efforts at Bishop, Drysdale is paid $85,000 a year. Salvin’s former salary of $200,000 was “a ridiculous salary to take out of a company not making money,” Drysdale said.
Drysdale has also sold or discontinued several of Bishop’s divisions, including a Newport Beach art supply center. “Most of the walk-in business was coming in to get a piece of paper or a ruler, and that just doesn’t pay,” he said.
Push Begins Next Month
With what’s left, Drysdale is organizing a full-scale push into the CAD market beginning next month when Bishop’s new catalogues are released. He wants to sell everything from the software right down to the chair an engineer sits on. “We want to be the one-stop shopping place for the engineer and draftsman,” he said.
On Wednesday, Bishop will begin selling Pathfinder, a CAD software program for the IBM PC. It already sells CAD software for the Apple Macintosh.
Analysts are decidedly skeptical. Bishop is late getting into the game. “I would be cautious in suggesting there is a vast opportunity in what they’re planning,” said Gary Hromadko, partner with the San Francisco investment banking firm of Robertson, Colman & Stephens.
Before things get better, Drysdale says, they will get worse. He says he expects sales for the 1987 fiscal year, to end this month, to be down again, with another sizable loss.
Drysdale lays much of the blame on Salvin, the company’s founder and its CEO until 1986. Salvin signed several deals with suppliers and foreign companies that Drysdale calls “ridiculous. I think the fellow who sat in this chair was flailing, trying to do things that would look great for the company.”
Salvin also started firing people, including top executives. Seven of them filed lawsuits alleging wrongful termination. Drysdale was a member of the board of directors when the lawsuits were filed. “Almost every month, for several months before he (Salvin) left, we got hit with wrongful termination suits. At one point, we didn’t feel we could go on.”
When the board of directors decided Salvin had to go, he had an employment contract that guaranteed him a $200,000 annual salary through 1991. Bishop was in no position to pay it. “We made an agreement to pay him off,” Drysdale said, somewhat bitterly.
Ousted CEO Has No Comment
The company paid Salvin a little more than $500,000 and then barred him from working there again or from ever owning Bishop stock.
Salvin, reached at his Beverly Hills home, refused to talk about Bishop. “I have no comment about the company. I am very satisfied with my arrangement,” he said.
If Bishop’s belated push into computer-aided design fizzles, analysts say Bishop would be the perfect vehicle for Drysdale to either make acquisitions, or, falling back on his venture capital skills, to invest some of Bishop’s money to help new companies in exchange for a piece of the business.
Bishop has no long-term debt, an unused $2.5-million line of credit and a net worth of $5.6 million.
“The only way they’ll grow is by acquisitions,” said David Wood, a trader and vice president with Seidler Amdec Securities in Los Angeles. “I think ultimately the company will have to change its direction altogether.”
BISHOP GRAPHICS AT A GLANCE Founded in 1965, Bishop Graphics Inc. in Westlake Village manufatures tools and materials used by engineers to design computer circuit boards. The company has 102 employees and 2.4 million shares of common stock outstanding.