A Datametrics Founder Yields His Managerial Reins to the Investors

Painful though it was, after 24 years at the helm of the company he helped start, Garland S. White decided he needed help.

Not that he had a great deal of choice. Datametrics, a Chatsworth maker of military printers, had nearly skidded into bankruptcy and was still heavily in debt 19 months ago when two venture-capital firms agreed to invest $2.75 million in dearly needed cash, but only if White let some new executives run the company’s day-to-day operations.

Most entrepreneurs have elephantine egos, but White, 59, an easygoing, raspy-voiced executive, was different. “I guess I had all the normal feelings. But I buried those feelings. Maybe, if you’d gone through what I did,” he said with a laugh, “you’d develop a certain amount of realism and humility.”

White remains chairman and chief executive, but Joseph P. Gibbs was imported from Eaton Corp. as Datametrics’ new president. As White delicately puts it, Gibbs “works the inside, I work the outside.”

White now tends to new products and is out talking to customers while Mr. Inside, Gibbs, overhauls the company’s disorganized assembly line. Meanwhile, Russell E. Quinn, installed as chief financial officer, has replaced Datametrics’ primitive manual accounting system with an automated, computerized system to help chop costs.

“White is still very much involved, but I think he has a significant throttle on him. The venture capitalists are going to pretty well call the shots,” said Robert Hanisee, an analyst with Seidler Amdec Securities in Los Angeles.

On some levels, things are improving. Datametrics’ order backlog is at $31 million, up from about $21 million a year ago, which helped increase sales 24% to $16.4 million for the nine months ended Aug. 1. Unfortunately, in the same period, Datametrics’ profits moved in the wrong direction, down 45% to $858,140.

“I can understand if there’s some frustration. It’s taking some time,” conceded John W. Blackburn, one of the venture capitalists who bankrolled Datametrics. But, he said, “There’s no question in my mind we’ve greatly strengthened the team. And I think you’ll see earnings rise in the coming quarters.”

For all of Datametrics’ problems, its mainstay product line of rough, tough military printers that can withstand severe temperatures, humidity, salt air and jolts from the enemy, remain much in demand. The Army hauls the rugged printers in the backs of jeeps into the battlefield. White says the printers are even radiation-hardened. If a small nuclear charge is set off, assuming any soldiers are still breathing, the printers will keep printing orders and maps.

The printers are used by the Air Force in its missile system, and by the Navy in its Trident submarines to print reams of data on missile launches. A submarine, of course, remains submerged for months at a time, so a printer absolutely, positively has to work. The military requires stringent performance tests, so, among other things, Datametrics shakes, bakes and freezes the printers in its laboratory tests. It helps explain why a single printer can cost $40,000.

The company got its start in 1962 when White, who has a master’s degree in electrical engineering from the University of California, Berkeley, completed a stint working for a friend’s new computer firm. “I just got some of the fever to run your own company. I thought, ‘Hell, it’s not that difficult,’ ” he said.

With two friends, he set up a consulting firm, and, in 1967, they linked up with another partner who steered them into military computers.

The company hummed along until 1980, when White detoured into the commercial market for computer printers. This is a business with customers totally different from the military and one rife with foreign competition. The detour turned into a disaster: In 1981 and 1982, Datametrics lost $8 million; its negative net worth (more liabilities than assets) ballooned to $4.5 million, and the NASDAQ over-the-counter stock exchange dropped Datametrics because of its shaky finances.

In September, 1983, the Securities and Exchange Commission also charged the company, White and two other executives with various violations, including failing to promptly report losses, and to record returns of its commercial printers. Without admitting or denying the SEC’s claims, the defendants consented to an injunction not to violate any future securities laws.

‘Very Disorganized’

“Basically it was a very disorganized company,” said Hanisee.

Meanwhile, White wasn’t endearing himself to the company’s stockholders. The company went public in 1971 at an adjusted stock price of $1.50 per share. Allowing for inflation, loyal stockholders had earned little, if anything, on their investments.

White needed help and money, so he swung a deal with two venture capital firms, Investments Orange Nassau of Boston, and Alan Patricof Associates of Palo Alto, who gained control, in effect, of 37% of Datametrics and a big say in how the company would be run.

“The company was undervalued, and it was only missing a few ingredients. We thought we had a chance for our investment to appreciate greatly in value,” Blackburn said. Their goal is $75 million in sales within five years, while boosting profit margins.

To White’s credit, he and the rest of his staff gracefully accepted the changes. As new talent arrived, some people were reassigned to other posts, but no executives were fired.

Some of the changes can be seen on the factory floor. Under the old system, the company’s printers were assembled, then tested. If there was a defect, the printer had to be yanked apart and fixed. Now the company has bought a $300,000 Hewlett-Packard printed circuit board tester to insure that the little boards work properly before the printer is assembled.

Little things add up to increased productivity. In six months, Gibbs said, the company has cut the number of hours that workers spend assembling a computer printer from 220 to 150 hours.

But with all the new executive and managerial talent the company brought in, selling, general and administrative expenses (some basic costs of doing business) are up nearly a third this year. That is cutting, at least temporarily, into profits.

“SGA, what’s that?” White asked his chief financial officer, when the subject came up in an interview.

White is clearly a man of ideas, not numbers or details. He says he’s delighted at the company’s prospects and his new role.

Firm Diversifies Again

With his help, the company is diversifying again, this time within the military market. Datametrics is selling its first color printer--the Navy is using one--the better to make bomb targets stand out on satellite photos. The company is also selling data storage tape cartridges to the military. And for use with military computers, Datametrics has a line of computer keyboards, ones that can withstand cold and heat and insure the U.S. defense system won’t falter if a soldier accidentally spills his Coke on his keyboard.

None of these products is really new, however, says Richard Pandolfi, president of Datametrics’ chief rival, Miltope, a $70-million-a-year firm based in Melville, N.Y. Pandolfi said Miltope has offered color printers for two years but has “only sold a handful” because of the high price. As for the military computer keyboard business, he said, it’s a relatively small market, while dealing in tape cartridges “looks like a dying market” because of advances in other high-capacity storage devices.

Still, Datametrics is off to a good start. It has booked nearly $900,000 worth of new tape and keyboard business. Certainly, Datametrics’ balance sheet is healthier; its financial results are no longer qualified by its auditors, and the stock is back trading on NASDAQ.