DH Technology, Inc.

15070 Avenue of Science
San Diego, California 92128
U.S.A.
(619) 451-3485
Fax: (619) 451-3573
Web site: http://www.dhtech.com

Public Company
Incorporated: 1977 as DH Associates
Employees: 1,025
Sales: $98.9 million (1995)
Stock Exchanges: NASDAQ
SICs: 3577 Computer Peripheral Equipment, Not Elsewhere Classified; 3679 Electronic Components, Not Elsewhere Classified

DH Technology, Inc. is the United States’ leading designer and supplier of printheads and other printing components. The company manufactures and distributes printers and related mechanisms that are used in such applications as freight and bar code labels, airline ticketing, bank and ATM transaction printers, lottery ticket printers, and retail point-of-sale transaction/receipt printers. DH Technology’s domestic operations are separated into four main divisions: DHPrint produces impact, thermal, and laser printers and mechanisms; DHTech designs and manufactures printheads and other printer components; DHDesign is responsible for the creation of customer-specific printing products; and DHServ handles all repair and maintenance activities. The company has experienced sales increases throughout the past decade, and has been recognized as one of the country’s top 200 small companies numerous times by Forbes magazine.

The Early Years

The beginnings of DH Technology can be traced to 1977, when Donald Hebert and Helmut Falk decided to create a company to design and produce new printing technology products. They formed DH Associates (named after each of their first initials), and began to explore different ideas in commercial printing technology. Their collaborative efforts resulted in the advent of printheads utilizing dot matrix technology, a type of impact printing that incorporates the arrangement of small ink dots to form an image on the printed page.

DH Associates began producing impact printer components, which were then supplied to other computer and printer manufacturers for use in their own products. A major boost during the early years was the company’s status as one of the main suppliers of printheads to the well-known Wang Laboratories, Inc. By the early 1980s, the market for DH Associates’ products had expanded dramatically, due to the increasing success and rapid growth of the information processing industry. DH attempted to keep pace by expanding its assortment of product offerings to include many different models of dot matrix printheads that met the needs of producers of numerous types of impact printers.

In 1983, six years after its inception, the company was restructured and named DH Technology, Inc. At that point, Hebert took on a role as the vice-president of product development, while Falk focused most of his attention on the managerial aspects of the business and stepped up to become the company’s chairman. In May of the following year, DH Technology initiated a public offering of its stock as a means of generating revenues to fund future expansion.

Expansion Efforts in the 1980s

Using the new base of operating income gained by the public offering, in 1985 DH purchased Micro Peripherals, Inc. of Salt Lake City, Utah, a designer and producer of dot matrix printers. Prior to the acquisition, DH had functioned primarily as a supplier of printer components to other manufacturers. The addition of Micro Peripherals, however, entered DH into the business of producing and selling the actual printer product itself. This change was beneficial because it offered the company diversity and enabled it to avoid relying solely on one product. Furthermore, DH now had a constant and reliable outlet for its printhead products, as the company’s two new divisions began working together to manufacture Micro Peripherals’ printers.

Meanwhile, Falk had been serving as DH’s acting CEO while the company searched for a new addition to its management team. In late 1985, William H. Gibbs joined DH as its new president and CEO, bringing with him both a wealth of experience in the industry and a strategic plan to increase DH’s growth potential. Prior to his arrival at DH, Gibbs had served as the president and COO at Computer and Communications Technology, and had spent the six years prior to that at Data-point Corporation. Upon assuming the administrative helm at DH, Gibbs began working to strengthen the company’s management and to increase its customer base.

Within a year, DH Technology had undergone some important changes. Most notably, the company attempted to lower its operating costs by consolidating its many operations locations to its headquarters base in San Diego, California, and also to Tijuana, Mexico. In the process, other facilities in California, Utah, and Puerto Rico were closed. Also, Micro Peripherals was renamed DHDesign, and was restructured so as to focus its resources on the development of customer-specific products. Essentially, the division’s marketing philosophy shifted from a production-driven attempt to locate buyers for its product, to an alternative market-driven process of developing applications to meet the needs of existing customers. DH’s original printhead design and manufacturing operations were renamed DHTech, and continued as another division of the steadily expanding parent company.

Sales of DH products increased as the company’s customer base expanded to include everything from manufacturers of data and word processing printers, to point-of-sale receipt printers in the retail arena, bank teller machines, and lottery ticket printers. Not only had DH increased its product line to include a diverse array of printhead models and types, but it was also supplying components to numerous manufacturers throughout the United States, Europe, and South America. With this worldwide success, and a dramatically increased bottom line since Gibbs’s arrival, in 1987 Falk celebrated the company’s tenth anniversary by retiring from his post as chairman. Gibbs was left to fill that role in addition to his other duties as president and CEO.

Also in 1987, DH secured many key contracts to develop specialty printing products for applications such as airline ticketing and a new U.S. Postal Service mail forwarding system. At that point, DH was becoming one of the most prominent printing technology suppliers in the country, and a good deal of the other domestic printer manufacturers either utilized DH components or licensed technology from the company. Because of this, DH created a new division called DHServ, to handle the repair and maintenance of all types of printheads. Meanwhile, DH continued to market its products using a customer-specific technology development approach, with a new focus on gaining more international business.

In 1988, DH’s revenues increased 78 percent from figures the year before, due mainly to an important acquisition made early in the year. In April 1988, DH purchased Eaton Printer Products of Riverton, Wyoming, formerly a division of Eaton Corporation, for approximately $6.4 million. This added thermal printers to DH’s product line, which the company began supplying to gasoline stations and convenience stores to print receipts. Eaton was renamed DHPrint, and began full shipment of new products under that name by the end of the year.

Meanwhile, DHDesign had entered into a joint venture agreement with Samsung Electronics in Korea to develop new printers for personal computers. DHTech was producing hundreds of thousands of printheads for over 100 customers worldwide, and in turn this widespread distribution of DH products gave DHServ more business when it came time for repairs or maintenance. Earnings per share doubled, and in 1989 DH Technology was listed in both Business Week ’s top 100 and in Forbes ’s top 200 list of growth companies in the United States. Annual sales neared the $50 million mark, most of which were generated in the domestic market, but also from increasing business in Europe, South America, Asia, Canada, and Mexico.

Aggressively striving to maintain its position as a leader in the print technology market, DH then decided to move all of its manufacturing and assembly operations to its facilities in Tijuana, Mexico. This move helped the company save production costs and undercut its Japanese competitors by taking advantage of the Mexican maquiladora program, which allowed U.S. companies to use less expensive Mexican labor. In 1989 DH also set up a new division called DHEurope, with its goal being to gain new sales opportunities overseas as Europe began to loosen its import regulations. Domestic business also continued to increase, as DHPrint obtained several large printing contracts from large banks on the West Coast and other companies in the freight industry.

Company Perspectives:

DH Technology has maintained its leadership position in the market by supplying its customers with products that provide the right combination of technology, functionality, performance and price. This is achieved through a balance of strategic product acquisitions and internally-developed new products. Continued leadership will be maintained through the reinvestment of corporate profits in new product development, covering a variety of technologies and markets.

The 1990s and Beyond

As DH Technology entered the 1990s, the increasing popularity and prevalence of laser printing technology caused some people to worry that the demand for DH’s products would start to decline. But the high cost of laser printing was in DH’s favor, because it made dot matrix a more cost-effective and attractive option for most of the company’s customers. According to the August 1990 edition of Money magazine, “Lots of people think dot matrix is dead because of laser printers, but they’re wrong. Dot matrix is cheaper and more reliable, so it’s used for printing lottery tickets, grocery store receipts and automated teller machine records.” Most experts agreed that it would be years before laser printers began to penetrate into the area of low-end applications, of which DH held over 50 percent of the market.

Nevertheless, DH made moves to expand its scope to include laser printing products. In late 1990, the company purchased Identification Business, Inc. (IBI), a business based in St. Louis, Missouri, that dealt in bar code tags and label applications. With the acquisition, DH strengthened its presence in the bar code market, while also expanding its product line to include laser technology. IBI continued to function as a separate division of DH Technology.

Early the next year, DH completed another important acquisition with the purchase of Datac pic, a designer and manufacturer of computer peripherals that was based in the United Kingdom. Datac pic dealt mainly in specialty printer products and hand-held data collection devices. Not only did this addition strengthen DH’s standing in Europe, the Datac acquisition also included Datacos pty, a branch that provided a direct sales and marketing network in Australia. These new avenues of international marketing and distribution provided a means of filling the role that had previously been served by the DHEurope division; therefore, in 1992 that division was dissolved.

After achieving a 500 percent increase in sales of bar code products since the company had acquired IBI, DH began to focus more attention on expanding that aspect of its business. In 1992, a portable printer and a hand-held data collection computer were introduced into the bar code application product line. Within two years of that, DH had completed the acquisition of two more bar code product manufacturers. Stadia Colorado Corporation was purchased in February 1994 for approximately $6.5 million, and in August of that same year DH also bought Cognitive Solutions, Inc. of Paso Robles, California, and all of its technology rights, for $10 million.

The company’s expansion efforts helped it achieve 1995 sales of almost $100 million. Profits were used to purchase the privately-held Mos Magnetics of San Diego, California, which entered DH into the market for magnetic heads such as those used in credit card and airline ticket readers. As DH Technology reached its 20th anniversary, it was well poised for continued future growth in the industry. The company’s operations were strategically positioned across the globe, with locations in the United States, Mexico, England, and Australia. Furthermore, with a hold on approximately 65 percent of the domestic printhead market, and with its skill in bar code, thermal, impact, and laser printing technology development, DH Technology possessed the diversity and experience to continue as a leader in its industry.

Principal Subsidiaries

DH Tecnologia de Mexico, S.A. de C.V. (Mexico); DH Technology pic (United Kingdom); DH Technology pty. (Australia); Identification Business, Inc.; Stadia Colorado Corporation; Cognitive Solutions, Inc.