$300 million market; Static curbs pay off for high-tech firm
There's good money to be made cleaning up pollution, as Thomas L. Venable will tell you. He's chairman of Spectrum Control Inc., a small pollution-control company based in Erie, Pa. But his business has nothing to do with toxic chemical waste. Rather, this $16.5 million firm cleans up electronic pollution - electromagnetic interference, or EMI.
EMI - the weak radio signals given off by a variety of devices, from desk-top computers to television sets - has a long and noble history, Mr. Venable says. Back in the 1920s, when radios were first installed in the Model A and Model B Ford, they picked up the pop-pop-popping of the car's spark plugs. It was found the radios needed special shielding to keep out such interference, in this case given off by the spark plugs.
Spectrum, founded in 1968, makes a wide variety of shielding and filtering devices. These do everything from keeping a personal computer, for example, from interfering with the neighbors' television set, to protecting the integrity of sensitive military and diplomatic communications.
The deals the company strikes range from sales of tiny bits of off-the-shelf hardware to elaborate consulting and custom-design projects - all aimed at ''making technology compatible with technology,'' as the company slogan puts it.
There are some 25 companies in this $300 million market, of which Mr. Venable estimates Spectrum Control has a 20 to 30 percent share. His firm, growing at a compounded rate of 26 percent annually over the past few years, is looking forward to even faster growth in the next couple of years.
Why? It sounds like a marketing manager's dream come true: New FCC regulations becoming effective Oct. 1 will in effect mandate the kinds of filters Spectrum and its competitors make for virtually all digital electric equipment. Regulations for home computers and some other equipment already have been phased in over the past couple of years.
Observers say the FCC's original plan was to regulate EMI from computers in people's homes, where there was assumed to be more potential for interference trouble than in the workplace. But once the regulatory snowball got rolling, it caught up industrial and commercial equipment, too.
The company, whose stock is traded over-the-counter, is projecting a near doubling in sales, to about $30 million, over the next 18 months; it already has a $9 million order backlog. Profits have been good, but have not kept up with sales, largely because of production-cost increases.
At the center of the expansion will be Spectrum's D subminiature shielded-filtered connectors, a 270-member family of variations on a theme. (Their name derives from their shape.) These devices, not much bigger than a dime, plugged into the cables of a terminal or other piece of equipment, solve interference-emission problems - and reduce the susceptibility of the equipment itself to other sources of interference. Mr. Venable expects to gain a 60 percent share of the market for these filters under the new FCC regulations.
Spectrum has a new plant to produce the filters and is doing research on new materials to use in them besides the barium titanate now in use.
Spectrum will have to share the expanding market, though. For instance, Sprague Electric Company in North Adams, Mass., has been enjoying a rush of business as computermakers gear up for the new regulations. ''Our business has changed considerably,'' says Frederick Scarborough, marketing manager of Sprague's filter division. The bulk of his firm's orders now are coming from electronic data processing companies; before much of the business was from defense contractors, he explains. (Defense orders are important to Spectrum, too.)
Mr. Scarborough, who defines Sprague as a ''major supplier'' of electronic filters, declined to be specific about who his customers are, but said they were ''household names'' in the computer business.
The business of controlling EMI is a good example of the sort of ''niche marketing'' that has grown up around high-tech industry.
Says Mr. Venable: ''A lot of companies don't want to do this stuff themselves. What you have to consider is that with a company like Digital, their focus, at (president) Ken Olsen's level, is making business systems, the office of tomorrow. In order to do that, their system has to meet FCC standards. And so they come to a company like ours to do the electromagnetic compatibility testing and recommend what might fix it; it's an interface between our engineering people and theirs. It's something they could do themselves, but that isn't their real focus, and so they contract it out.''