Partnership may help area tech firms thrive

Partnership may help area tech firms thrive

By WILLIAM H. SOKOLIC, Courier-Post Staff

Even before the terrorist attack on the World Trade Center towers, technology companies faced less-than-robust prospects for the immediate future. The burst of the dot-com bubble last year led the way toward an economic downturn that borders on a recession.

The Sept. 11 disaster simply magnified the downslide. The combined impact has affected companies young and old, small and large, local and national.

The tragedy has also accentuated inherent shortcomings in certain South Jersey tech-related businesses. SciDyn of Cherry Hill has seen technology pass it by, and struggled to play catch-up. Franklin Electronic Publishers of Burlington Township and SL Industries Inc. in Mount Laurel were
unable to capitalize on their own innovations, or lacked the marketing expertise to sell what they developed.

The pitfalls of these three companies are a warning to future high-tech businesses that the safest path to success may be to partner with local colleges such as Rowan University.

Rowan received a $6 million grant from the state Economic Development Authority to launch a technology center. On Friday, entrepreneurs, residents and government and business leaders will gather to help shape the school's planned $15 million to $20 million South Jersey High- Technology Center.

The South Jersey High-Tech Summit II, co-sponsored by the Courier-Post, Rowan and the Southern New Jersey Development Council, is designed essentially as a large brainstorming session, said Philip Tumminia, Rowan's executive vice president.

"We need to take some time to really put together a firm plan on what the South Jersey Technology Park at Rowan University will actually look like, both initially and long- term," said Tumminia of the center, which officials hope to complete as early as 2004.

"We have ideas about how it should evolve, but we feel we should open up the process to a degree to people who have an interest in technology and people who have expertise and opinions," he said.

Particular focus is expected on which area of technology the center should specialize in and how Rowan can close an estimated $9 million or greater funding gap.

The summit, a sequel to one a year ago, is scheduled at Rowan Hall from 8:30 a.m. to 12:30 p.m. Scheduled to participate in the panel are the university's board of trustees, the deans of Rowan's engineering and business colleges, Rowan President Dr. Donald Farish and others.

Help to be offered

The thrust of the center will be to offer the full resources of Rowan to regional businesses in developing and delivering products and processes to expand their companies. The center will help draw up business plans, overcome problems and enact a marketing strategy, said Dianne Dorland, dean of
the college of engineering.

Eventually, it will include a high-tech incubator for emerging technology companies, something already on the drawing board at Rutgers University for its Camden campus. Such an incubator offers resources and amenities for the kinds of young entrepreneurs involved with technology companies.

Meanwhile, the end of the decline for high-tech businesses could be six to nine months away, experts say. But the Sept. 11 attacks make such predictions very dicey, said Gary Beach, publisher of CIO Magazine, which deals with technology issues for corporate information officers.

What is certain is some companies won't make it to the other side, he said.

The technology downturn this year owes much to a euphoria that bordered on blindness to sound business practices, Beach said. Strong tech companies such as Dell, Intel and Cisco established business plans at the end of last year, forecasting a continued growth rate between 20 and 40
percent - a costly error, he said.

"Those rates were not sustainable," he said.

Instead, these and other businesses expect to max out with a modest growth in the 5 to 10 percent range - if that. The difference has affected purchasing, hiring, research, and ultimately, income and profitability.

"People were still buying technology, but the stocks were hammered because of the business plans. Tech companies scrambled to adjust their expense base," Beach said.

Companies that adjusted well to changing winds over the years have also paid a price in 2001.

SWEMCO, the Moorestown manufacturer that shifted nicely from defense contract mode to civilian mode in the last decade, expects to see revenues fall 18 percent this year. SWEMCO's advantage lies in letting clients do the costly research and marketing. It concentrates on the more stable
production of high-tech products such as semiconductor components, radio frequency generators, microphone boom assemblies and disk drives.

"We contract with the manufacturer. We build other people's products," said Carl Szczepkowski, president of the family-owned company. SWEMCO manufactures products for such clients as SmithKline-Beecham, Northern Telecom, J&J Snack Foods and Siemens.

Szczepkowski isn't too concerned about the predicted decline in the $9 million in sales from last year.

"We still have the ripple effect of the economy hurting us and we need to pick up additional accounts. But that's not bad compared to other companies," he said.

Not every tech company has slipped in the current cycle.

Lockheed Martin enjoys heady times thanks to defense industry contracts, which account for almost all of the business at its Moorestown center. The plant, home to 3,100 workers, has hired several hundred new employees this year at a time when layoffs have run rampant elsewhere. The center specializes in building complex electronic systems for naval use.

Variety key to success

"Our business is on track to meet the commitments to to corporate shareholders on all financials," said Andrea Lawrence, director of communications. The combination of needed technology for the defense department and long-term contracts helps Lockheed Martin avoid reliance on consumer buying or depend on the health of other corporations for its bread and butter.

SciDyn has depended too much on one element for its bread and butter.

Formerly known as Science Dynamics, the company designs and manufactures products for the telecommunications industry, providing the backdrop for telephone services such as automated voice announcements. But its niche is communications packages for prison systems, hardly enough to sustain continued growth.

The company saw its attempts to expand fall flat even in good times in part through the failures of others. A deal with NYNEX to produce debit cards for pay phones disappeared through poor marketing and the growing interest in cell phones. A move into high-tech Internet communications crumbled when its major account went belly up.

The successful development of new technology hasn't guaranteed success.

Franklin Electronic Publishers, the industry leader in hand-held electronic text, struggled in the late 1990s. Its REX PC Companion personal organizer, and the Rocket eBook - the world's first hand-held electronic reader capable of downloading books from online book stores - failed to catch on
with the buying public. Its latest venture, eBookMan, a multifaceted organizer and reader, has also started slowly.

"Franklin doesn't have the resources to promote the eBookMan," said Irwin Silverberg, an analyst with Burnham Securities in New York.

Earlier this month, SL Industries sold its SL Waber subsidiary. SL Waber invented the power strip surge protector, but sales lagged behind upstart companies. The sale of SL Waber came as shareholders called for the company to get rid of its various subsidiaries as a way to shore up sagging stock
and declining revenues.

"The key word for the future is survival," Beach said.

Smaller companies may have more trouble weathering the downturn because of a weaker financial position, said Dr. Arun Kumaraswamy, assistant professor of management at the Rutgers University School of Business at Camden.

Especially in light of the Sept. 11 tragedy, these firms may have to lay off skilled workers just to get by, and then build up a new work force when the economy improves, he said.

Customers' desires crucial

Those who don't make it will open up the marketplace more for those who do. Those who do are also those who listen to their customers rather than their engineers, Beach noted. "Marketing is too often run by engineers, who believe in a field of dreams. Build it and they will come," he added.

Take Franklin. For years, the company was saddled with devices unable to be upgraded or used in the products of competing companies. But recently, the company permitted downloading of text through its Web site for those who own readers from Palm, Hewlett-Packard and others. Palm will also create a series of Franklin-produced electronic books available on its own cartridges.

"Palm makes and merchandises it, runs the promotions. All Franklin does is open the envelope and take out the checks," Silverberg said.

Still another factor in who makes it is deciding when the upside begins. ''If you call it right as it begins, you get a significant advantage over those who wait too long (to ramp up)," Beach said.

The future may rely more on partnering with local colleges such as Rowan and Rutgers-Camden.

Advances such as a high-tech incubator for emerging technology companies will help make South Jersey ripe to enjoy a growth curve over the next five to 10 years, said Dr. William Reynolds, executive director of the William G. Rohrer Center for Management and Entrepreneurship at Rutgers-Camden.

With real estate and the cost of living less expensive than other areas in the Washington-New York corridor, the region offers tremendous upsides, not to mention available infrastructure for technology such as fiber optics.

"It's an ideal hub to start a small tech manufacturing company," Reynolds said. "It's an ideal spot to start up an Internet business."

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Date Published: Monday, October 1, 2001 - 11:34
Source URL: Courier-Post