the early 1980s computerized engraving had arrived in the Recognition
and Identification Industry in a very BIG way! Among the manufacturers,
three major players had evolved: Dahlgren (front runner), New Hermes and
H-Square. Competition was fierce but the market was growing so fast that
there was much business to be had. Users were discovering the virtues
of the exciting new engraving technology as the engraving industry underwent
its first major change in nearly a century. A lot of the early system
owners can tell interesting stories about their entry into computerized
Hoffpauirs engraving experience led him to consider ways to modify the machines software. He didnt intend to sell the modified software at all, explains Barone. He just wanted to make it into something he could use.
Hoffpauir and Barone had experimented with programming at an early age. When I was still in college, I was at their house one day, programming his TRS80 Model 1, state-of-the-art computer, says Barone. I did a checkbook program and explained the language I was using to Jay. He just ran with it. Hoffpauirs innate curiosity, combined with his interest in engraving and self-taught mechanical inclination, naturally led Hoffpauir to modify the machine he found so intriguing. Says Barone, He started to write after-market software to make the machine more productive. He developed multiple plates, grid cutouts, batch engraving, long plates and tall plates. People began learning of Hoffpauirs user-friendly after-market software, and in 1982 he began marketing it through ads placed in The Engravers Journal.
Jay and I started programming around the same time, says sales rep Roy Brewer. He learned so fast! He just skyrocketed! Jay never had a course in programming. He went to the library and learned all he knew either from books or from tinkering with computers. He had a tremendous hunch as a proprietor and created his own solutions. At the same time, Hoffpauir began selling the Dahlgren systems, spreading the word of the revolution that was taking place.
The Battles Begin
In the meantime, Will Dahlgren, Ted Claire and Lew Silverstein were having a good old time as the industrys number-one seller of computerized engraving machines. The business grew very quicklyso quickly that its owners did not always have time to adjust to the changes that were taking place. In the early days, says Dahlgren, the place we rented for the businesswhere we had to use a forklift to get the machine insidewas about 500 sq. ft. And I lived there, too. I had to get up early in the morning and take a shower before the employees arrived. But the place didnt have a shower, so I used this plastic Flintstones sandbox for bathing. Id hose down over the sandbox, and then dump the water down the toilet. Occasionally Id be running late, or an employee would arrive early, and Id be in the middle of my shower.
It wasnt long before Dahlgren needed bigger quarters. They moved into offices that were 4,000 sq. ft., and because things were starting to happen pretty fast, leased another 3,000 sq. ft. in the same building in San Franciscos Mission District. The business was rapidly sprawling into a much bigger operation than Dahlgren and Claire had bargained for, and they began to grow uncomfortable with their increasing management responsibilities. In one year, sales grew to $1 million. They were making 12 machines a month and were backlogged with orders. We enjoyed the take-off more than the flying of the plane, says Dahlgren. The company had grown to about 20 people, and we needed someone to take care of personnel and handle financing. We just wanted to put on blue jeans and play with fun stuff. But it was becoming clear: Someone was going to have to put on a suit and go talk to the bank. Someone was going to have to buy a suit!
They discussed their options with their accountant, Ray Kelly, and came up with the idea of either selling the business or hiring a CEO. They decided to sell.
Our accountant had a client who was looking to buy a company and who was willing to pay based on the slope of the sales. We had only sold about 80 machines at that point, and we had a one year backlog. We sold to Ray Schaaf in 1981, and part of the deal was that wed stay on for three years and continue developing products.
Much to the relief of the owners, the sale transaction was seamless and, more important, they no longer had to deal with the headaches of managing a rapidly growing company. Lew Silverstein was an immediate casualty of the sale. He and Ray didnt see eye to eye, says Claire. The things that Lew had been doing were things that Ray anticipated doing, so within a few months, Lew left. Dahlgren and Claire stayed on to help the company battle the increasing competition that was coming their way. Their last major contribution was developing the Wizzard.
In the meantime, New Hermes owners were going ahead with their companys sale. Although Morrison had wanted to buy the company from Schimmel and Dannheiser, the deal fell through and the company ultimately sold in late 1981 to Chinook, Inc., which was headed by Tom Kuhnen, an investment banker from Snowmass, CO. Chinook was founded in the 1930s, and the company made recreational vehicles until the energy crunch of the early 70s. After business dropped off in the 70s, Chinooks owners were looking to buy an operating company with good earnings. They found one in New Hermes.
Mr. Kuhnen and his investors saw the worldwide nature of the company, its huge market share, tremendous cash flow, and the fact that it had no debt, and they offered to buy the company, says Bernstein. But Kuhnen bought it on a leveraged basis and put a lot of debt on the booksa fact that many long-time New Hermes employees didnt like. In addition, Kuhnen brought in his own management team, which ran the company in a much different fashion than Schimmel and Dannheiser had.
In early 1982 Kuhnen brought in a new president named Jim Myers, who had been vice president of the Toledo-based Questor Corp., a much larger manufacturer than New Hermes. Myers was an executive-type CEO, not a hands-on leader. He once stated to EJ publisher Mike Davis, I dont know how to operate an engraving machine, and when Ive been here five years, I still wont have learned.
But New Hermes had other issues to face. With the old New Hermes (after defecting) reps now selling thousands of Dahlgren machines, New Hermes market share was eroding rapidly. And although the company was putting forth some effort to join the computerized engraving market, they still werent aware of just how bigor how permanentthe revolution was going to be. In an EJ article from Sept./Oct. 1983 (The Incredible New Hermes Story: Part 2), New Hermes representatives stated that the standard pantograph is expected by New Hermes to remain the fundamental choice for most engravers. Accordingly, the company was largely focusing on ways to promote and improve their pantograph line.
By 1984 the company was facing financial difficulties. According to New Hermes then-vice-president Bob Domito, Kuhnen and the banks sucked all the money out of the company that they could find. When New Hermes was in business under Schimmel, it was a very straightforward company with good management and good personnel. For example, when there was a downturn in the economy and people got laid off all over the country, Schimmel never laid off anyone. Hed keep the employees on and find work for them to do. Theyd clean up the factory or repaint the machines. But under Kuhnen, the old feeling in the company was gone.
A number of industry insiders agree that Kuhnens/Myers management was the main problem. They structured the company and ran it like it was General Motors, but it was a small, entrepreneurial business with mom-and-pop clientele. It didnt work well to create many levels of management and highly paid people.
For a while during the Kuhnen/Myers era, New Hermes turned to H-Square to manufacture their systems. It was an odd situation, as buyers could go to a trade show and buy an H-Square machine from H-Square, or buy the same machine from New Hermes with the New Hermes label on it. This marriage of convenience provided a short-term solution to the problems of dealing with Gerber for the cash-strapped New Hermes, but it wouldnt last.
Things started to turn around in 1984 when New Hermes was purchased and Hobart (Hobie) Kreitler left Dictaphone to join New Hermes as the new company president. Kreitler had a solid reputation as a 20-year veteran of business; he was used to businesses with problems, and he could fix them. Mr. Kreitler saw a 45-year-old company with a huge name in the industry, says Bernstein. He saw that New Hermes still had a 40% market share worldwide, and he saw a major opportunity. He was a great, great manager.
Kreitler released the Kuhnen management team and brought in his own. Kreitler faced some major challenges: he needed to restore the companys financial stability yet keep the day-to-day operations going. And, he realized immediately that New Hermes needed a viable, low-end, affordable computerized engraving machine that could compete in the marketplace.
New Hermes already had preliminary designs in the works for an 8" x 10" engraving table and was looking for a place to manufacture it. They found Wayne Hoffman, a former associate of Kreitler and an engineer in Melbourne, FL. The relationship produced a machine that proved to be a turning point for the company. It pretty much saved the company, says Bernstein. It sold for under $6000, had twice the table size as Dahlgrens Wizzard, and it had user-friendly software, written by Su-ling Hsu of H-Square.
The New Hermes 810 could engrave everything from jewelry to trophy plates to signs, which covered the companys major three markets. It also had the capability to do light industrial engraving, and its advent generated huge revenues back into New Hermes. Now on the right track, New Hermes was able to begin introducing other competitive machines to the marketplace, such as the 1219 (with a 12" x 19" table), which, according to Bernstein, was suited to 85% of the market. New Hermes was on the road to recovery, and ready to battle the other market stalwarts. But New Hermes was not the only company eager to enter the fray.
Among those to leave New Hermes after the disastrous sales force conversion was Jack Domiteaux, the son of Bob Domito, New Hermes Vice President of Sales. Differentiated from his uncle, Jack Domito, by the nickname Toledo Jack, Domiteaux first got his feet wet in the industry when he took over his fathers sales territory for New Hermes. After leaving that company, Domiteaux sold Dahlgren machines, though he tended to clash with Dahlgrens then-president, Ray Schaaf.
You know that Frank Sinatra song My Way? says Mike Davis, who knew Domiteaux well. Jack was a My Way guy. He had a psychological burr under his saddle; he tended to clash with whatever authority figure was around. He had an odd way of doing things, but always with a flair. People really liked him, and he inspired fierce loyalty among his employees. He was a thorn in the side
of [Dahlgren president] Ray Schaaf. Jack was always criticizing Dahl-
grens products: Its too noisy! The cutter isnt long enough! The spindle isnt long enough! He would make things to add on to the Dahlgren machines to improve them.
Jack wasnt negative, continues Davis. He was filled with great ideas and he had a keen insight into the marketplace. Jack had little patience with those who werent up to speed with him.
Tensions between Toledo Jack and Schaaf eventually reached a breaking point, and Domiteaux left Dahlgren to start his own engraving machine company, known simply as Domiteaux Incorporated. Once he had his own company, Domiteaux began producing machines that were to his own liking, such as the first computerized machine that could engrave cylindrical objects.
Mike Dehabey, owner of Allgraphics, in Toledo, OH, met Domiteaux in kindergarten, and the two remained friends through high school and beyond. Jack was very good at inventing and designing machines. Even when he was working for his dad at New Hermes, Jack could take an idea, visualize a holding fixture, and be able to engrave with a pantograph. He was an artist. He could dream things up. I remember one time, Dehabey continues, New Hermes had a customer that made turbine blades for jet engines. The company wanted to engrave on the blades, so Jack took a six-spindle machine, modified it, and made it so it could engrave on multiple blades at a time. He also made a machine that could engrave on bowling balls. He was great that way.
Domiteaux also created his famous TLC (Tender Loving Care) machine that fit onto the base of a New Hermes GTX pantograph, modifying the manual engraver so that it could be run by a computer. This machine afforded a level of comfort to people who were still leery of the new technology, and it was a huge step forward in making computerized engraving accessible to all those who didnt want to give up the comfort and familiarity of their trusty pantographs.
Enter Western & Signature
Dennis Trifletti, who had seen the potential of the technology early on, had customized his own computerized machines to meet his needs, which involved extensive sign work. I made one of the first 12" x 24" machines, says Trifletti. We made it for ourselves, and we were able to do larger work and engrave much faster with it. People in town saw our machine and wanted one, so they were buying Dahlgren systems and sending them to us to have them converted. Ultimately, Trifletti formed Western and sold his engraving business. He took on the sales of Dahlgren machines and Rowmark plastics.
In the meantime, a mechanical engineer names Chris Parent started United Innovations Inc., which later became Signature Engraving Systems. Along with two engineers, Jim Voss and Jim Richmond, Parent began selling a flatbed plotter in 1982, but he quickly discovered a niche in the specialized engraving machines market that focused on jewelry engraving and developed his first machine, the Signature 8000. According to Annette Peloquin, Signatures current marketing director, the company grew quickly because Parent thrived on a challenge: A customer would say, If you could do glass, then Id buy a machine. So Chris would sit down and figure out a way to engrave glass. Then someone would say, This is too tedious, you have to do all the calculations for each line. So hed come up with programming to eliminate that step.
Signature Engraving made a huge leap forward when the company struck a deal with Cole National Corporation, owner of the Things Remembered chain of gift stores. The stores sell jewelry and gift items such as door knockers, desk sets and picture frames. But the average Things Remembered employees were often young women around the age of 20, with no experience in engraving, who often accidentally ruined the objects they were trying to engrave with a pantograph. Signature Engraving approached the chain with a solution: a retro-fitted unit that allowed the stores existing New Hermes GTX-Super pantographs to be controlled by a computer. The deal was a huge success, and it put Signature Engraving on the map.
Eventually, Signature discontinued the pantograph retrofit machines, replacing them with several models designed for engraving jewelry and giftware.
With more and more companies joining the fray, competition was becoming ferocious. Scott Bradford, who was one of the original H-Square sales reps, tells a story of frustration from the salesmans point of view: I remember, going to an H-Square sales meeting in California. They had decided to introduce a new model of their machine, and they wanted us to sell it. So we said, Ok, can we see it? No. Have you got one? No. We said, Okay, how far along is it? Well, they said, theres no prototype yet. But when we get it, its going to be great! They hadnt done anything to develop this machine yet. The problem was, they had already placed large ads in the trade papers announcing this new system, and when the ads came out the next month, people started calling us! It drove us crazy! It didnt even exist! The ads just showed an artists rendering of the machine. Competition was that fierce.
80s & 90s
While competition was growing in the field of computerized engraving, Jay Hoffpauir was doing well at Hoffco Sales & Supply, selling his after-market software. The computerized systems hed bought allowed him to increase the amount of engraving work he took on, and the engraving side of his business was growing locally.
In 1986, at the encouragement of industry leaders, Hoffpauir took the plunge and decided to sell computerized engraving machines equipped with the software he had developed. Hoffpauir formed a partnership with several people, including Doug and Bill Richardson (former Dahlgren reps), who agreed to manufacture tables for the new Xenetech systems.
Hoffpauirs unique software used the industrys first Windows-type operating system, with the pull-down menus that we are so familiar with today. The operating system, known as GEM, was well-received and considered to be cutting edge in the industry. Xenetechs relationship with the Richardsons worked well for several years, but shareholder disagreements caused Xenetech to go through company ownership restructuring in 1990. The shareholders had difficulty agreeing on how to become successful, says Guy Barone. There was infighting, and things didnt go as well as they should have. The whole corporation had to be reorganized. At the end of this period, Hoffpauir succeeded in regaining sole ownership of the company.
For a while, Xenetechs engraving tables were manufactured by Western Engravers Supply (now known as Vision). This relationship ended in 1994, as Xenetech realized that their future success depended on being able to offer a complete hardware and software package.
Xenetech thrived under Hoffpauirs guidance until he passed away in May 2000 after a year-long battle with cancer. The company today is owned by his widow, Kathy.
Another industry death occurred much earlier, in 1986. Not long after making a splash with his own brand of innovative machines, Jack Domiteaux was diagnosed with cancer. The disease spread rapidly, and Domiteaux died not long after he was diagnosed. After he passed away, Domiteaux Inc. was bought by PCA, the Pantograph Corporation of America. Geoff Thompson, who hired on at New Hermes after the mass exodus of the sales force, worked a New Hermes sales territory until he was recruited by PCA in 1986. After PCA bought the assets of Domiteaux, I was hired as vice president of sales. My job was to build a sales organization. After two-and-a-half years, sales were growing nicely, but the fellow running the company was spending too much money and building an infrastructure that was bigger than youd logically expect.
PCA tried to run the company like it was a big business, and they went bankrupt, says Roy Brewer. Brewer had taken a job with PCA in 1988 as sales manager for half of the United States. I was terrible at it! he says. I am not a good manager and I dont know how to motivate people. I was very unhappy, and I felt like PCA was going the wrong way. They were ignoring our core market.
Thompson recounts the upheaval. The venture capitalists pulled the plug on PCA and fired most everyone at management level. We had 90 days to figure out what to do. A British company called Newing-Hall, who had been the distributors of Domiteaux products in the U.K., stepped in and invested in the company in 1989. It is still called Newing-Hall today.
Throughout the 1980s, New Hermes continued to introduce new machines and regain market share. From 1985 to 1989 we increased our revenue over 35% a year, says Jim Bernstein. We were able to pay down our debt 60% ahead of schedule.
Under Hobie Kreitlers guidance, New Hermes pursued a joint venture with Gravograph, New Hermes French sister company. After consolidating their operations with Gravograph, the owners and managers of New Hermes purchased the stock of the company back from Kuhnen and investment partners, who still legally owned it. Says Bernstein, From a management standpoint, the company became friendly again. We owned our company, similar to the days of Mr. Schimmel and Mr. Dannheiser.
Throughout the late 1980s, New Hermes focused on new markets, such as hospitals, hotels, the government, and the signage market. The company went public in France in 1989 under the name Gravograph. In 1991, after helping New Hermes again become one of the industrys leaders, Hobie Kreitler left his post as the companys president.
The stiff competition created by the influx of so many companies in the 1980s caused Dahlgren to falter. By the mid 80s, the company had been sold many times over and in 1987 wound up in the hands of PIC, Product Identification Corporation. Rich Zydonik, now Rowmarks Vice President of Operations, started at Dahlgren the day it was sold to PIC and found that while the company had been battling new challenges in the market, it had neglected customer service. My first day there, they handed me 200 pink notes that were messages from irate customers. It was a nightmare. In that stack, there were sometimes four or five calls from the same person, getting more and more mad with each call. And it was my job to fix their problems. It was an interesting beginning, to say the least! exclaims Zydonik.
At this point, Dahlgren was still considered by many to be the leader in the market. The Wizzard was designed so every man, woman, and child in the country could own and operate one, says Zydonik. People didnt even know the Dahlgren name they just said, I have a Wizzard. Hows that for name-brand recognition? Its almost impossible to kill a company like that. But we did. We torched it.
How did Dahlgren lose its spot as the number-one producer of computerized engraving machines? According to Zydonik, the company spawned its own competition through poor distribution systems and missed sales opportunities. Will Dahlgren agrees that the company could have done more to ensure its market dominance in the early days: We could have been more aggressive about increasing our production. We had more competition than we would have had if we had been able to satisfy demand more quickly. There were a lot of smaller competitors that we might have discouraged by growing more rapidly. Zydonik also mentions that PICs mismanagement and inattentiveness at Dahlgren led to a loss of market share.
A succession of new presidents, including Larry Timque, Orton wisegraver, and Mark Goldman took over Dahlgren in the years after PICs management. During the Goldman era, Dahlgren was beset by financial problems. EJ publisher Mike Davis relates a story about inviting Mark Goldman to send their newly released System 300 to EJ for a product review.
Goldman seemed quite excited, and arrangements were made for Dahlgren to ship us a system immediately following a trade show. When the show was over, the machine never arrivednor did an explanation. The story we heard eventually was that the machine was damaged in shipping and was tied up pending a freight claim with the trucker. However, Davis continues, a Dahlgren employee told me, off the record, that the company was on C.O.D. with all its vendors, and that they decided they couldnt have a system tied up for a few weeks without severely impairing cash flow. Consequently, the article was never written.
In 1995, Dahlgren filed for bankruptcy. At that point, Kevin Brown of Suregrave stepped in and bought Dahlgrens assets. Suregrave has owned and managed the company since then, and computerized engraving machines are still produced under the Dahlgren name.
Western (now Vision Engraving Systems)
Dennis Trifletti partnered with Dahlgren Systems in 1983 as the companys table manufacturer. The relationship ended after PIC bought Dahlgren, says Trifletti. PIC realized that 25% of their business was being done by Western-Dahlgren, and they started to worry that if I went away, that business would be gone. So they bought me out. Trifletti signed a non-compete agreement that lasted 18 months, and after that period he got involved with many projects, including a partnership with Xenetech. They were making the software and the electronics system, and we were making the tables, says Trifletti. Dennis had some good, solid designs, says Zydonik. They were better than Dahlgrens, because Dennis tended to simplify stuff. Hes a good engineer and made bulletproof products.
In the mid 1990s, Xenetech decided to make their own tables, and Western and Xenetech parted ways. Western was in deep trouble, says Zydonik. They only had half the components to make a system. So Dennis banded together with several distributors, and went from 0 to 60 with a new product. Western was down only six to nine months! When Westerns new machines were launched, they were an immediate hit, spawning incredible growth for the company. Western changed its name to Vision in 1994, and the company continues to produce specialty machines and lasers today.
End of an Era
Those were the wild, wild west days of the industry, says Scott Bradford. It was a really exciting time, because the industry was developing at a lightning pace. Computer technology was the big determining factor in how fast we could go.
The industrys turmoil was due to an exciting mix of new technology, fierce competition and the unique character of the R&I business. Working this industry is not like selling copiers, says Trifletti. This industry is special, and the people who make it in this business are the people who understand engraving. Many people in sales think you dont have to understand the business to succeed, you just have to know how to sell. But thats not true. As things evolved, people understood more and more what they liked about the different machines. At first, if it would engrave anything, it was the best thing ever. As we went along, people got smarter and the machines got better. People started shopping for features, for the different things that the different machines would do.
But where will the industry go in the future? What will be the next engraving revolution? As technology continues to evolve, the industry will evolve right along with it, and something is bound to be invented thats as revolutionary as the computerized engraving machine was. The next big thing is out there, waiting to be discovered and percolating in the minds of the entrepreneurs who know and love the engraving industry. Are you one of them?
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