Pacific Data Seeks Nearly $21 Million in Stock Offering
Pacific Data Products, a San Diego manufacturer of accessories for laser printers whose sales have skyrocketed in the last year, filed a registration statement with the Securities and Exchange Commission on Tuesday for an initial stock offering to raise $17.6 million to $20.9 million.
A total of 3.2 million shares priced between $8 and $9.50 each will be offered for sale. Of the total, 2.2 million shares will be sold by the company and 1 million shares by existing shareholders.
The company will use proceeds from the stock offering for general corporate purposes, including working capital, product development and marketing, said Jack Fitzpatrick, chief financial officer. The offering is being administered by an underwriting group co-managed by Montgomery Securities and Cowen & Co.
Pacific Data Products was founded in February, 1986, by John Downing, a former marketing manager for software publishing leader Digital Equipment Corp. Downing raised $100,000 in start-up funds from a group of private investors and since has attracted venture capital backing from Summit Partners in Boston, which now owns 14.6% of the company.
Pacific Data Products spent its first year and a half developing software and hardware products that enhance the performance of desktop laser printers. By mid 1987, it shipped its first product, a memory board that is added to the guts of a laser printer to increase its built-in memory.
Today, Pacific Data Products employs 93 people and manufactures nine laser printer accessories, including a font cartridge that increases the number of fonts and print styles a laser printer can produce. The company also makes memory-enhancing software packages. To date, the company has sold more than 170,000 units of its software and hardware products.
Last year, the company reported $35.5 million in revenue, nearly four times its 1988 revenue of $7.6 million. In 1989, profits grew to $5 million from $299,999 the year before. The growth resulted from increased sales of new and existing products, Fitzpatrick said.
Pacific Data Products is one of a dozen companies “of any consequence” carving out a niche in the laser printer accessory market, said Jonathan Seybold, president of Seybold Publications in Malibu, a market research firm that conducts conferences in desktop publishing.
The market for laser printer accessories has grown as the market for laser jet printers has expanded, Seybold said. Today, an estimated 3 million laser jet printers, almost two-thirds of which are manufactured by Hewlett-Packard, are in use nationwide.
Laser printers, which operate off a computer software program, tend to be quicker and quieter, and produce higher-quality print than the popular ink jet and dot matrix printers. But historically, they also have been more expensive and therefore have had little penetration in the home computer market.
But industry analysts expect that to change now that industry leader Hewlett-Packard has introduced a laser printer that retails for less than $1,000.
Although Pacific Data Products is one of the best-known manufacturers of laser printer accessories and can expect to participate in the growth of the laser printer market, the company’s future is by no means secure, Seybold said.
“The danger in being in the add-on business is always that the manufacturer himself will offer the same products,” Seybold said. “Hewlett-Packard is offering the same products (as Pacific Data Products). If you don’t have an advantage, people are going to buy from the manufacturer rather than you, so you have to offer features, prices or performance that the manufacturer doesn’t have.”
In fact, Pacific Data Products has priced its memory boards and font cartridge additions low enough to compete with Hewlett-Packard’s versions.
