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Fast Track

FastTrack/24″/mike1st/mark2nd Smart and Friendly Inc. Year Founded: 1982 Core Business: Manufacturing CD recorders and discs for computers Revenues in 1997: $24 million Revenues in 1998: $40 million Revenues in 1999 (projected): $60 million Employees in 1997: 25 Employees in 1999: 45 Top Executives: Perry Solomon, president and chief executive; Marie Solomon, executive vice president and chief financial officer Goal: To build the company into a global player in the computer industry Driving Force: Demand for cheap, simple ways to store data and music By CHRISTOPHER WOODARD Staff Reporter Everything about Chatsworth-based Smart and Friendly Inc. is frugal. The company, which develops, assembles and distributes compact disc recorders and discs for computers, has no sign outside its manufacturing plant on Nordhoff Street. The conference room has a modest table and chairs and not much else. In fact, president and chief executive Perry Solomon has worked for 15 years at the same desk he purchased for $159. But don’t let the modest surroundings fool you. The privately held company generated $40 million in 1998 revenues, a 67 percent jump from $24 million in 1997. Projected 1999 revenues are $60 million. Smart and Friendly’s growth is being fueled by the need for an easy-to-use, affordable way to store computer files, back up hard drives and record music CDs using MP3 technology over the Internet. “Anything from the printed page to a motion picture is available on a very low-cost, plastic disc,” said Solomon. “It’s a true multimedia device. What a miracle.” An estimated 6 million CD recorders were sold in 1998 industrywide, but the number is expected to reach 14 million this year. At that rate, 34 million of the devices will be sold in 2002, according to Santa Clara Consulting, an industry research group. Meanwhile, demand for blank CDs is expected to increase from 1.5 billion in 1999 to 2.2 billion next year, the consulting firm found. Users of the recorders and discs include entertainment companies, software developers, publishing companies, libraries and, increasingly, home computer users. Prices range from as low as $159 for an entry-level recorder to $1,499 for more-sophisticated devices. Smart and Friendly contracts out much of its actual manufacturing. Its discs are made by Taiwanese manufacturers, and electronic components of its CD recorders are made by its partners in Japan and Korea. Those partners also do some of the research and development, keeping in constant contact with Smart and Friendly’s in-house engineering staff. Activities at the Chatsworth plant are primarily restricted to assembly and packaging. The company then distributes its finished products to major computer electronics chains including CompUSA, Fry’s Electronics and Best Buy. Competition is formidable none other than Hewlett Packard Co. but Smart and Friendly maintains a variety of partnerships with Asian electronic firms that help keep innovations flowing. “I know as soon as that alarm clock goes off in the morning, I’ve got to be better than HP to survive,” said Solomon. “That’s a great motivator one that everyone here shares.” Mary Bourdon, principal analyst who tracks the optical data storage market for Dataquest, said Smart and Friendly has succeeded by pricing its products competitively and by being quick on the draw to get new innovations to market. “When eight (speed) recorders came over the wall, they were the first to package them and get the product to consumers, with all the software applications and customer and technical support,” she said. “They move a pretty high volume of product.” Solomon’s concern about competitors (especially HP) helps explain the lean-and-mean approach to business, as well as the frugal digs. “It may seem unusual; we don’t have a sign out front. But at the point I feel it will increase revenue, we’ll get one,” said Solomon. “You can’t take ego to the bank.” Solomon, 54, never went to college and got his start in consumer electronics in the 1960s, managing the “hi-fi department” at a Fedco department store. He learned more about the business by later distributing electronics on behalf of several corporations in the Western United States. But Bourdon said Solomon’s early sales experience may be a key to his company’s success. “I think it works to his advantage. He’s more market-oriented than technology-driven,” said Bourdon, who also noted that Solomon is well known in his industry and chairs the Optical Storage Technology Association, a trade group. Like any consumer electronics company, Smart and Friendly faces intense price pressure. The company recently announced price reductions of as much as 42 percent on its line of rewritable CD discs, with a single disc now retailing for $2.49. “When the technology first came out, single discs were selling for $34.99,” Solomon said. There’s also a move to go after the less-savvy computer audience; the company recently picked up Wal-Mart as a customer. “My big advantage is, this is my hobby. I truly love doing what I’m doing,” he said. “When people ask about my hours, I tell them I only work half days. The only question is, which 12 hours you’re talking about.”

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