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After Delay, Dataproducts’ Ink-Jet Printer Hits Market

Times Staff Writer

Deliveries are always a bit slow around Christmastime, but Dataproducts can’t blame the post office.

After six months of production delays, Dataproducts’ important new ink-jet computer printer is finally where it belongs--in customers’ hands.

The much-touted printer marks a technological advance over other models because it doesn’t require ink ribbons. Instead, a solid block of waxed-based ink is heated and sprayed onto paper. But Dataproducts’ chief executive Jack Davis said the delay was worth it.

“It has the highest print quality of any printer of any technology,” Davis said. He fully expects the ink-jet technology to bring in half the company’s sales in five years.

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Not everyone is a believer, however. “It’s a sleepy company,” said Rod MacIver, who runs MacIver & Co., a New Jersey investment firm that owned stock in Dataproducts. “I don’t think innovation is their strong suit. Maybe that’s unfair. But when you own a stock for a couple years and don’t make any money, you come away with a negative impression.”

Dataproducts shareholders can only hope Davis is right. The company, headquartered in Woodland Hills, is the nation’s largest independent maker of computer printers, and it sorely needs another hit product after three years of declining sales and what appears to be another year of losses. Dataproducts’ stock, meanwhile, closed Monday at $8.75 per share, contrasted with a high of $31 four years ago.

A year ago, company executives said the ink-jet printer could ring up as much as 15% of Dataproducts’ sales this year. But bugs in production slowed shipments; only in the current quarter have the new models begun to go out the door. With only a few hundred printers shipped thus far, at a base price of $2,795 each, they have probably accounted for less than $1 million in sales, a fraction of the company’s expected $320 million in sales this year.

Meanwhile, the computer printer industry remains hotly competitive, as Japanese rivals Canon, Fujitsu and Ricoh, as well as Genicom, a Waynesboro, Va., firm that is nearly as big as Dataproducts, scrap for what business there is. In a now mature industry, profits for most printer companies are negligible.

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Analysts, however, are uncertain how popular the ink-jet printer will be. The jet spray produces letters that are slightly raised, or embossed, on the page, and the shiny ink may crack or chip when a printed page is folded.

The Dataproducts entry is also roughly double the price of some high-quality laser printers which have a proven reliability.

“I think there’s still a big question in terms of acceptability,” said Gary Jensen, an analyst with Dataquest, a market research firm. “The embossed type of look turns some people off. There’s also a question of market demand because this an expensive product.”

Another possible shortcoming is that Dataproducts’ current printer works only in black ink. Howtek, a rival New Hampshire firm, will sell a model that prints in color. Dave Mayne, senior vice president with Printronix, an Irvine manufacturer of computer printers, said, “My feeling is ink jet’s greatest application will be in the area of color.” But he said it will probably be a small market because only a handful of situations require colors, among them, CAT scan printouts.

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Dataproducts also faces competition from computer giant Hewlett-Packard, which offers an ink-jet printer at less than one-third the cost of Dataproducts’ model. However, the Hewlett-Packard model prints at a slower speed and is not as versatile.

But there is little doubt about Davis’ commitment to this new technology. Last July Dataproducts bought out its former partner, Imaging Solutions, formerly a division of Exxon, for about $10 million. Davis is pumping more than half his company’s $22-million research and development budget this year into various ink-jet projects, among them, a color printer.

And a few weeks ago, Dataproducts settled a patent infringement suit with Howtek, in which Dataproducts will receive $2 million and at least $3 million in royalties from Howtek in the next three years.

Davis’ goal is to recapture the company’s past glory. Dataproducts made its reputation and early fortune by selling printers directly to major computer firms, such as IBM, Digital Equipment and Wang, who in turn resold the printers with their own products. But a computer industry slump and Dataproducts’ decision to compete against the Japanese in low-cost personal computers sent its profits into a nose dive.

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The company swung from a record $27.7-million profit in the fiscal year ended March, 1985, to a $26.8-million loss a year later as sales fell 25%. To cut costs, former Dataproducts’ chief executive Graham Tyson laid off 2,000 employees, and he recruited Davis from Harris Corp., a Florida electronics firm, to succeed him in April, 1986.

Davis didn’t come cheaply. He earned $460,641 last year. But for the six months ended in September, the company reported a $6.4-million loss on another 6% drop in sales to $158 million. Davis calls this a “time of transition.”

He has swept out much of the company’s executive suite, bringing in a new chief financial officer, operations chief and head of marketing.

Davis has also been broadening the company’s sales approach so that it will rely less on sales to major computer firms, and more on smaller distributors and resellers. A new venture, for example, with Telex, a Tulsa firm, calls for Dataproducts to come up with a printer that will turn out a combination airline ticket and boarding pass on a single sheet of paper.

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“We’re on stronger footing than 18 months ago,” Davis said. “We have a better product portfolio. And we’ve strengthened the management team. The payoff will occur. The future is brighter.”

But as MacIver points out, Dataproducts now is worth more dead than alive. “They have a valuable service business and a valuable line-printer business and valuable real estate. And maybe what they should do is sell all that stuff off and give it to the shareholders,” he said.

It would make for some yard sale. Dataproducts has $125 million in cash (or $6 per share), and it owns 21 acres in the prestigious Warner Center complex in Woodland Hills. The land--excluding buildings--is worth $30 million (another $1.43 per share), according to Seth Dudley, a commercial real estate broker with Julien J. Studley in Encino.

The cash and land value nearly match the current price of the stock. Because of its shrunken stock price, Russell Quinn, Dataproducts’ former chief financial officer, said “they probably are more subject to takeover.”

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Worth $180 Million

Dataproducts’ current market value--the total value of all its stock--is only about $180 million. In the age of billion-dollar deals, it would make for a pipsqueak transaction, although the company has been buying back some of its stock.

High-priced executives like Davis, of course, aren’t brought in to liquidate companies. Corporate raiders tend to that chore. Davis’ task is to lead the company on a forced march away from its problems.

Thus far, Dataquest analyst John Boldt grades Davis’ performance as a C plus or B minus. “Davis has been able to get the place organized. The morale of the company was not very good,” he said. “Jack has had an opportunity to assess his army, to get all his generals named and placed. Now we’ll see if he can execute and win the war.”

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When Davis is pressed, however, he doesn’t sound like a general about to start claiming victory. “It’s not going to take off tomorrow,” he said. “The industry is a tough one. We’re making a lot of progress. But it’s gradual progress.”


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