Parent Company Abandons Logicode, Seen as Costly Stepchild

As one of the first companies to introduce the high speed-56K modem, Camarillo’s Logicode Technology seemed literally to be on the fast track in the data communication manufacturing industry.

Less than a year later, however, the firm is not on any track at all.

Logicode’s parent company, Inductotherm Industries of Rancocas, N.J., has shut down operations after trying since November to find a buyer for the company.

“It’s rather simple,” said Allen Gharapetian, vice president of Logicode. “Inductotherm is a large, $1-billion to $1 1/2-billion company. They’re not used to really competing in markets like this, where the [profit] margins are very low. The shareholders have decided to cease operations because it was no longer a profitable operation.”

Gharapetian said that nearly all of the approximately 70 Logicode employees who lost their jobs have found work with other firms. The company also will continue to staff a warranty and technical support division in Chatsworth, which will remain open as long as necessary--up to about two years, he said.

Gharapetian said Logicode, founded in 1989, did not come close to producing the profit margin of many of Inductotherm’s other holdings, which include industrial telecommunications and induction furnace manufacturing operations.

“It’s more of a business philosophy,” he said. “Is a 25% margin the type of margin a business can run on? Yes. But is it something investors want to put money in and get less than they would get putting money into a mutual fund?”

In comparison to Logicode’s 25% return, Gharapetian said Inductotherm officials see margins upward of 60% for many of their other companies.

“They have equipment that goes for $2 million to $3 million a pop,” he said. “When you make that kind of sale and make a 60% to 70% margin, that’s a very successful company.”

Inductotherm purchased Logicode in 1993, Gharapetian said, with the goal of reaching such lofty returns.

“In reality, they wanted to get into the high-tech consumer side of the business,” he said. “In my perception, they thought it was a similar type of business to their others--you could get into it, become the best and nobody is going to touch you. But in this business, it’s not like that. Every six months, things change.”

Gharapetian said Logicode only made sense as a long-term investment.

“The company hasn’t been necessarily profitable--whatever we earned was an investment back into the company,” he said. “It was definitely a long-term approach, but the parent company and investors figured out that this would take a lot more effort and a lot more devotion than they were prepared to give.”

Logicode management is currently seeking buyers for the company’s product lines and other tangible assets.