President of Auto-Alarm Firm Began as Customer
Ze’ev Drori takes another sip of tea and recalls one night in 1979 when he wanted to drive around San Francisco.
He was walking toward his Porsche Turbo, an expensive sports car that ostensibly was protected by a $900 auto-alarm system. As he approached the car, two would-be thieves bolted out the doors and fled. Drori found the car’s stereo ripped halfway out of the dashboard.
Worse yet, he said, his alarm, “which was supposed to protect my car, was the first to go. And it was on the pavement, resting in peace.”
So he bought another alarm, this one from a tiny Sun Valley firm called Clifford Electronics. And, as Victor Kiam of Remington Products would say, he liked it so much he bought the company.
Drori won’t say what Clifford cost, but it is unlikely that the sum proved much trouble for him. Now 48, he is a multimillionaire from having founded Monolithic Memories, a successful Silicon Valley maker of semiconductors, in 1970. He was Monolithic’s chairman until it was sold last August to rival chip maker Advanced Micro Devices for $422 million in AMD stock.
An Israeli immigrant who didn’t speak English when he moved to the United States at age 22, Drori said he first invested “several hundred thousand” dollars in Clifford in 1981, became its sole owner and president in 1985 and moved the private company to Chatsworth 18 months ago.
Auto Thefts Increasing
Clifford is a major player in auto security, a market with annual sales of about $450 million and rising. Auto theft jumped 11% nationally in 1986 after rising 6.8% in 1985, according to the National Auto Theft Bureau, a research group based in Palos Hills, Ill. Nationwide, 3.9 million cars, trucks and other vehicles--or one out of every 46 registered in the United States--was stolen or had its contents rifled in 1986. Such auto-related crimes cost Americans and their insurance companies $6 billion a year, the bureau estimates.
Of course, a security system does not ensure that the car will not be stolen or burglarized, and Clifford doesn’t provide a money-back guarantee if a crook breaks through its alarm to gain entry. “Anything can be stolen if you want it enough,” said Sgt. Clarence Henderson of the vehicle-theft division of the Los Angeles County Sheriff’s Department. “But an auto alarm is a good deterrent.”
Drori will not disclose Clifford’s sales. But he said Clifford sells about 10,000 systems a month, and he did not quarrel with estimates that Clifford takes in an average of nearly $250 per unit. Using some simple math, that would put Clifford’s annual sales at roughly $30 million.
One of Clifford’s main competitors, Code-Alarm Inc. of Madison Heights, Mich., doesn’t believe it. “They’re about the same size as us. We think they’re slightly smaller,” said Rand Mueller, president of the publicly held Code-Alarm, whose sales were $8 million in 1986 and $6.2 million in the first half of 1987.
Unlike Code-Alarm, most of the industry’s players are privately held, so there are no precise statistics on each competitor’s rank. But, industry executives said, Clifford and Code-Alarm are among the largest, along with Crimestopper Security of Simi Valley and MaxiGuard of Elk Grove Village, Ill.
Clifford, originally formed in 1976, now has 1,500 dealers nationwide, sells 13 various security systems or convenience products for autos, such as remote-control engine starters, and has 100 employees. The systems’ retail prices, installed, range from $150 to $900.
The market for electronic auto-security systems began flourishing in the mid-1970s, although many early systems were unreliable because of what Drori called “extremely crude” components. One familiar result: shrieking car alarms going off in parking lots for no apparent reason.
Drori and a few others have tried to change that by packing the alarms with more sophisticated electronics, namely the “intelligent” microprocessor chips that Monolithic helped pioneer. Clifford’s products, “from a technical standpoint . . . are very well-perceived in the industry,” said Joe Palenchar, editor of Autosound & Communications, a trade journal.
Typically, auto alarms still appeal mostly to owners of cars costing at least $20,000. But Drori wants to expand the market, making security systems as affordable to owners of Chevys as to owners of Porsches (Drori owns one), Rolls-Royces (he owns two), Mercedes-Benzes and BMWs (he owns one of each).
The challenge of reducing crime statistics and increasing profits at the same time is what excites Drori. “I don’t like to be involved in frivolous things,” he said. “The biggest kick I’m getting today is the creation of jobs.”
Israeli Army Veteran
The bearded Drori lives with his wife and two children in a five-bedroom house in Bel-Air, a long way from the warlike Middle East where he grew up. Born in Tel Aviv in 1940, eight years before Israel became a state, Drori joined the Israeli army when he was 17, and by age 20 he was leading platoons during Israel’s incessant border skirmishes against Egypt and other Arab nations. He also was lucky, suffering only a bullet graze during his military stint.
Drori then moved to the United States in 1962 to attend Polytechnic University in New York. He also “took a crash course in English, and I made a policy that every day I would learn 10 words from the dictionary,” he recalled.
Drori also worked nights at whatever job he could find. He cleaned industrial smokestacks, drove a limousine, worked in a slaughterhouse, washed dishes and taught Hebrew.
In 1965, he got a bachelor’s degree in engineering and was hired by International Business Machines at its Burlington, Vt., facility. Drori was lucky again--his engineering team was pioneering the use of the semiconductor memory chips that would later revolutionize the electronics industry.
He moved up rapidly at IBM until 1969. “I became cocky,” he said. “I wanted to start my own company.”
But first he took a job with Fairchild Semiconductor in Sunnyvale, one of the pioneering Silicon Valley electronics firms, “to get exposure to the outside world” beyond IBM. After a year, he quit to find investors for his new company, and in 1970 he had garnered $2.5 million to launch Monolithic Memories.
Monolithic got off to a fast start as sales soared from $600,000 in 1970 to $20 million four years later. The company wanted to go public to raise more capital, but the 1973-’74 bear market and a recession put the plan on hold.
In the meantime, Monolithic spent about 22% of its sales on research and development in an effort to keep pace with the rapid changes in chip technology. But it wasn’t enough, and when Monolithic’s sales began to slow in the mid-1970s, “we stalled,” Drori said.
Whereas bigger chip makers such as Intel kept booming, Monolithic managed only meager growth. Finally, in 1980, Monolithic raised more capital by going public at $21 a share. Drori sold $1.1-million worth of his own stock in the offering, and kept about 5% of Monolithic’s stock, worth about $6.7 million at the time.
Drori also gave up the day-to-day management of Monolithic by stepping aside as president, but remained chairman. There were reports in business journals that Drori was shoved aside by a board unhappy with Monolithic’s performance. But Larry W. Sonsini, a former Monolithic director, said there was no board ouster of Drori.
After 10 years “I became tired of running the same thing over and over again,” Drori recalled. “I don’t believe that anybody should be the president of a country, the president of a company more than seven years, let alone 10 years, because the ideas become stale,” he said.
So, Drori began pursuing other interests. After moving to Los Angeles in 1983, he briefly tried to help finance movies, but then got involved in Clifford when the firm was “at the brink of going under.” To protect his investment, Drori “gradually had to come in and assert more and more direction,” he said.
Although Drori still views Clifford as a long-term financial investment, he’ll abide by his own rule and surrender the presidency of Clifford within seven years, he said. But for now, he likes being at the controls.
“It reminds me of Monolithic Memories at its growth stage,” he said.
