I don't think this article was posted here, caught it in the Globe and mail a few days back.
"T
here have been lots of failures in this market. There are already fewer players than when we started." -- Terry
Graham, May, 1996.
For a while, Terry Graham was the poster child for Canadian hypergrowth, high-tech firms.
Mr. Graham, the affable president of Markham, Ont.-based Image Processing Systems Inc. (IPS), liked to talk
about his strategy for managing "hockey stick" growth -- his expression for several years of flat sales that suddenly zoom
straight up.
This spring, the hockey stick broke as the company watched Asian orders for its quality-control systems dry up
overnight. "There were no tell-tale sputter signs," Mr. Graham says. "We just fell off a cliff -- kaboom."
As the company's March 31, 1998, year-end drew closer, Mr. Graham had to break the news that the party was over
and IPS's sales projections were not going to hold up.
"I had a management meeting and I said, 'These revenue numbers are unachievable. We're not going to hit it. And Q1
and Q2, we're fried. Let's make sure it's not the case for Q3 and 4.' "
Suddenly, the rapidly expanding company, which depended on Asia for about a third of of its sales, was cutting costs
and losing money.
By June, the same month that IPS was celebrated in the pages of Profit magazine as the country's fastest-growing
company, Mr. Graham was in the final phases of a major restructuring plan.
The company lost $12.2-million on revenue of $31.8-million for the fiscal year, ended March 31, 1998. That included a
$7.9-million good will charge it took as part of its purchase of Chicago-based packaging concern Tisma Machinery
Corp. in 1997.
Its share price went along for the ride. From a 52-week high of $2.45, it has dropped as low as 35 cents this month and
closed yesterday at 60 cents on the Toronto Stock Exchange.
In August, the company that for most of its life had fretted about the challenges of recruiting laid off 30 of its 200 staff
members. At the same time, chief financial officer Arthur Stern, hired to help the company expand, handed in his
resignation. The company expects to announce his replacement next week.
"There was no animosity," Mr. Graham says. "We each have different career goals. He signed on with a growth firm."
That also was Mr. Graham's assignment, but he says he is in for the ride. He was hired by the company's founders in
1992 to help the tiny, four-person firm move from the research to commercial stage. The company, which makes
quality-control devices that use computers and digital cameras to scan for manufacturing flaws on production lines,
attracted such big-name clients as Mitsubishi Corp., Phillips Electronics, Daewoo and Siemens AG.
For Mr. Graham, 45, this is the third high-tech concern he has navigated through rough waters, and he says that
experience has helped him to be more decisive this time around.
"I've seen it before and I reacted a lot quicker than I did the first and second times," he says. "You've got to make a
decision. The longer you go the more jeopardy you face."
But Mr. Graham says the company also can't afford to take its foot off the gas. "There's no getting around the fact it was
an enormous crash, not just for us but for all the cars in the race. But you can't slow down. If you do you'll get
rear-ended and be part of the mess."
Faced with shrinking Asian sales, Mr. Graham says the company has shifted its focus to Europe and is now looking to
hire in order to meet demand from that market next year.
As for the hockey stick, Mr. Graham says the line on the company's revenue graphs may never look like that again. But
he says that's partly because as a company gets larger, it is hard to turn in 300-per-cent growth numbers year after year.
Despite two bad quarters this year, he still is predicting revenue growth for the full year. And that, he says, will be sweet.
"Nobody wants to be in a fight, but if you get in a fight and you win it, it sure feels good." |
