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Small Business: Special Delivery to the Bottom Line

Special Delivery to the Bottom Line After the tech fallout cut revenues by a third, a Moorpark quality assurance firm concentrated on helping clients move products to market more quickly. By CARLOS MARTINEZ Staff Reporter Three years ago, Moorpark-based quality assurance firm Quality Logic Inc. had a good business. In 1999, it had sales of $9.9 million providing a number of services to mainstream clients like the Hewlett-Packard Co. and International Business Machines Inc. Then, like many companies, it saw an opportunity in the dot-com bonanza, took it and like many suffered the consequences. Today, after drastic cutbacks and layoffs, the company has narrowed its strategy, hoping for recovery by helping companies get their products out the door faster. “When we saw the dot-coms start to fall one by one, we knew we were in trouble,” said James Mater, company CEO. The privately held quality assurance firm was relegated in 2001 to watching its client list and its revenue drop, wondering whether it also would go by the wayside. Today, the company is doing about two-thirds of the business it did just two years ago. “We’re still here, so that’s a lot better than some other companies hit by this recession,” he said. Established in 1999 when Mater’s Woodland Hills-based Electronic Data Systems acquired Genoa Electronics, the firm mixed Genoa’s software-making expertise with its own electronics equipment testing service to create Quality Logic. Quality Logic tested printers, computer hardware and software for a number of mainstream firms. But more and more dot-coms also found a need to continually test their Web-based software and servers. Quality Logic had revenues of $18 million in 2000 and projections of even more in 2001, Mater said. But after the dot-com meltdown, Quality Logic was left to cut back drastically or become another casualty of a tough economy. “We started (2000) with 200 people and we ended up with 100 after we closed offices and cut out all the waste, but it didn’t really seem like enough,” Mater said. When Mater couldn’t cut anymore, he and his staff decided it was time to rethink their strategy. “We thought, ‘Let’s start pushing marketing,’ and eventually that got things started,” he said. Instead of focusing on quality assurance programs that ranged all the way from product development through the manufacturing process, Mater told clients his company could help them move their products faster and more efficiently to market. Efforts to stem the revenue drop through the new sales pitch slowly began to work, said David Jollota, Quality Logic COO. “We had to shift our focus to help companies with the problem of ‘how do we help you get your product out the door?’ instead of ‘how do we help you with some good development practices?'” Jollota said. Dan Twitty, vice president of application programs at Bank of America, said companies now are more interested in streamlining the manufacturing process than in traditional quality assurance in the overall product development process. “They can’t afford to spend money on things that they won’t see a return on for years,” he said. The company focused the marketing strategy on a few key clients, like Hewlett Packard and Microsoft Corp., and more sales dollars began trickling in. Still, Quality Logic closed 2001 with $12 million in sales, $6 million less than a year earlier. CFO Deborah Fields said the sharp revenue decline took the company by surprise. “We suddenly had to shift our focus from investing in our infrastructure to having to pull back and put things on hold,” she said. The challenge in recovering from a tough economy, Jollota said, is to convince companies that quality assurance is truly important to their business. “People still think quality assurance is a luxury, so companies cut out the people in QA and later they end up paying for it with a bunch of defective products,” he said. Quality Logic Inc. today is continuing to push for companies to outsource their quality assurance services as well as their IT and computer consulting needs, Mater said. And while his company is still clearly in the recovery mode, Mater said, he hopes it will begin to expand by next year. “That’s our goal,” he said. Spotlight: Quality Logic Inc. Core Business: Software development and quality assurance services, information technology services. Revenue in 2000: $18 million Revenue in 2001: $12 million Employees in 2000: 200 Employees in 2001: 100 Goal: To help companies get their products out the door faster Driving force: An environment where technology companies need to boost bottom lines quickly

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