Terminal Data Hopes to Turn Tide of Losses : Management: The company is searching for a new president and the chairman expects its performance to improve.
Richard M. Drysdale, chairman of Terminal Data Corp., says things are looking up at the Moorpark company. But things couldn’t have gotten much worse.
Terminal Data makes equipment that converts documents to microfilm, microfiche or optical disks that store images in computers. Except for a modest $174,000 profit in its fiscal year ended Sept. 30, 1987, the company has lost money every year since 1984--losses totaling $12 million. Meanwhile, it has been shrinking for some time; sales in fiscal 1989 were only $22 million compared with $46 million five years earlier.
And the door to the executive suite keeps revolving. David W. Krar Hutton, the company’s third president in four years, quit last month. Investors also have been leaving the scene. Since 1987, three-quarters of the market value of Terminal Data’s stock has been wiped out; it now stands at about $4.5 million. The stock currently trades for $1 a share, and few Wall Street analysts bother following the company. Terminal Data still had $2.4 million in cash on hand as of March 31, but that was down from $4.7 million 18 months earlier.
Who’s manning this troubled ship? Terminal Data’s board is soon expected to announce a replacement for Krar Hutton. For the time being it’s Drysdale, a Los Angeles venture capitalist known for helping emerging companies, but in the past year he’s been an executive or director of four local companies that seem incapable of making much money.
Besides Terminal Data, Drysdale, 58, is chairman of Bishop Inc., an Agoura Hills maker of engineering and drafting equipment that lost $2.9 million over its two fiscal years ended Sept. 30, 1989. He’s also a director of PerfectData Corp., a Simi Valley manufacturer of computer cleaning products that earned only $142,000 the past two years combined--although that was an improvement from earlier years. And until recently he was a director of Truvel Corp., a Chatsworth maker of scanning equipment that, after losing $5 million in its fiscal year ended Sept. 30, filed for protection from creditors in bankruptcy court on June 5.
Drysdale said he’s helped most of the companies improve even if they’re not yet posting steady profits. At Terminal Data in particular, “we would expect further improvement,” he said, noting that the company posted a smaller loss in the latest quarter compared with a year earlier.
But Terminal Data has to make major strides to again get the attention of stock analysts such as Michael Murphy, editor of the California Technology Stock Letter, who stopped following Terminal Data’s stock in recent years as the company’s problems mounted. And whichever candidate Terminal Data’s board chooses as president will have his or her hands full.
Terminal Data’s business is divided into two sectors: micrographics, which means cameras, scanners and other equipment for converting documents to microfilm rolls or microfiche plates, and “electronic imaging,” a broad category that mainly refers to products that take electronic pictures of documents for storage on disks so that they can be rapidly called up on computer screens or transmitted via telephone lines. It also refers to machines that can scan a document from microfilm and transmit the image.
The systems can cost from $10,000 to several hundred thousand dollars, depending on whether they are micrographic or electronic imaging, how many users the system will accommodate, the amount of storage they provide and so forth.
Since its founding in 1968, Terminal Data’s mainstay has been micrographics. But that business is slowing because of “technological uncertainty” in the marketplace stemming from the arrival of the new electronic imaging machines, the company said in its fiscal second-quarter 1990 report to the Securities and Exchange Commission.
Terminal Data also has the newer electronic imaging products, but their sales haven’t risen fast enough to offset the slowdown in micrographics. In the quarter ended March 31, electronic imaging equipment accounted for 21% of Terminal Data’s sales, up from 16% a year earlier. And micrographics fell to 57% of sales from 65% a year ago.
How soon electronic imaging can bolster Terminal Data is unknown. The market for electronic imaging equipment is still embryonic, said Donald Newman, vice president of marketing and product development at Bell & Howell Co., which makes similar equipment. “It’s gaining acceptance, but there’s still a lack of standards, and there’s a high number of players that’s causing confusion.”
The competitors include such powerhouses as Eastman Kodak, Bell & Howell, International Business Machines and Minnesota Mining & Manufacturing (3M). Ironically, Terminal Data sells much of its equipment to some of those companies so that they can incorporate Terminal Data’s gear into the larger systems they sell to their own customers.
“I don’t know anybody who competes head-on with Terminal Data,” said Murphy, the newsletter editor. “Their real competition are the in-house design shops of their customers.”
Drysdale agreed that the emerging market for electronic imaging products “has developed much slower than anyone thought,” and that “frankly, we had to spend more money . . . to develop high-quality scanning products than we expected to,” which contributed to the company’s losses.
Terminal Data was founded by Michael Rothbart, who remained chairman until he retired in May, 1988, and was succeeded by Stanley R. Schoen. Schoen then was replaced four months ago by Drysdale, who has been a Terminal Data director since 1986. (Rothbart and Schoen remain on the board of directors.)
The company has struggled since 1985, when it built a second plant in Simi Valley to handle its expansion. The expansion never came, and Terminal Data, then based in Woodland Hills, was forced to move its headquarters staff and other employees into the new facility in 1986 to save cash. The next year, it sold the new building to Gibraltar Savings to further cut costs, and it later moved to its current home in Moorpark.
Terminal Data, now with 200 employees, is still paring expenses, which helped cut its losses in its fiscal third quarter ended June 30 to $269,000 on sales of $5.93 million, from a loss of $1.45 million on sales of $4.43 million a year earlier. For the first nine months of its fiscal year, Terminal Data has lost $1.79 million compared with a loss of $2.31 million, while nine-month revenue slipped to $16.2 million from $16.3 million.
The trick is for Drysdale’s new president to get Terminal Data in the black for good. Drysdale said the company’s overhead costs are now low enough to show a profit with increasing sales, which the company hopes will come from greater sales of new electronic imaging equipment. In the meantime, it needs continued sales of replacement cameras, scanners and the like to its existing micrographics customers.
The company is upbeat about its outlook, as it has been before. Two years ago, Terminal Data told stockholders in its annual report that it was “now better able to compete effectively in the fast-moving world of high technology.” But it kept piling up losses.
TERMINAL DATA CORP. AT A GLANCE
Terminal Data Corp. in Moorpark produces scanners, cameras and other equipment used in converting documents to images for storage on optical disks, microfilm and microfiche. Founded in 1968, the company has about 200 employees and sells about 15% of its products to foreign markets.
