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Double-Play CEO

A high school internship at Prudential Securities exposed Steven Bronson to the securities industry, and by the time he was 25 years old, he already had several years of experience at a Wall Street trading desk and had launched his own investment fund. Bronson had a knack for identifying overlooked opportunities and for finding ways to breathe new life into companies that had lost their luster, two traits that would be integral to his success decades later when he went from investment to management. Today, he is chief executive at two of the Valley region’s biggest public companies. While his ascent to the top job at Interlink Electronics Inc. in Westlake Village was a friendly one, his embattled takeover of Qualstar Corp. in Simi Valley made headlines for his role as an activist investor. He has turned both firms from near-failures into profitable enterprises with big plans for future growth. He runs them from a single headquarters in Simi Valley, where he also serves as chief executive of Qualstar subsidiary N2Power Inc. Bronson sat down with the Business Journal to discuss his journey from Wall Street to the C suite and finding balance between his personal and professional lives. Question: What was your first big turnaround? Answer: (Around 1996) I was hired as an investment banker at a company called Micron Instruments, and about a month later I told them they were wasting their money and they should stop using me as an investment banker. They were kind of taken aback. What were the issues that you saw? It was very clear to me very early on that the two founders had different goals. One wanted to retire, so he was making all the business decisions very conservatively because he was thinking about retiring, so it was holding back the growth of the business. The other founder wanted to take some risk but take the logical steps to grow the business. Until they resolved that conflict, it was a waste of time and money. How did they react? They got back to me after a few weeks and said, “We agree with you. Can you help us find a buyer for the founder that wants to retire?” At the time I put together a very small group of investors and then personally put in about 50 percent of the capital that was required to buy out the founder that wanted to retire and ended up serving as interim president for about a year. I really analyzed the business and what steps were needed to grow the business, but I was still connected to and running the investment firm, so I ended up through a business contact locating a very successful team … that ended up coming in and taking over. Subsequently six years later, that company was sold for 10 or 11 times my original investment. That was my first taste of doing a turnaround and being a really hands-on principle investor. This passion has never stopped. What did you do next? With the experience of running that firm, I divested my first investment firm and started a second one that really focused on what I loved doing the most: Finding these existing businesses, working with them to help them raise capital and M&A and invest, personally. Having my licenses and being affiliated with my own investment firm allowed me to bring in other investors when I saw compelling opportunities. Fast forward to 2005, I came across Interlink Electronics. Title: Chief Executive Company: Qualstar Corp. and Interlink Electronics Inc. Born: Queens, New York, 1965 Education: High School Diploma, Hillcrest High School Career Turning Point: High school internship with financial firm Personal: Lives in Westlake Village with his wife, three children and Charlie, a mini goldendoodle Hobbies: Walking, swimming, running, outdoor activities and time with family What did you see in Interlink? I initially was introduced to the company by an independent research analyst who said the pieces were worth more than the whole. (Initially) it was purely a passive value investment for me. They had the core technology and two subsidiaries built around the core technology. I started doing some research and realized that the core technology – even though there were some aspects that were dated – was still very relevant for today and where the world was going. I approached the CEO at the time to see if I increased my ownership whether they would be open to a friendly change of control, which they were. What was the state of the company when you took over? They were doing $4 million and change, losing a few million dollars, with no long-term strategic direction. What did you do first? I analyzed the technology, what we needed to do to position ourselves in verticals and how to pursue new markets and expand our customer base. You take a look at some of the things they’ve done in the past, what worked, what didn’t work. You try to avoid making the same mistakes, but more importantly you craft the strategy that allows you to get the business back on its feet. What kinds of mistakes were common between the two companies? Prior to my involvement with either of them, there were either bad decisions that were made or decisions that were deferred. In Qualstar’s case, the founder never liked to let anybody go or make changes to production, for example. If the volume of the business is dropping off, you have to make the tough decisions – do we have to unfortunately lay some people off or change some of the product? Were there any common denominators about your turnaround strategy for both companies? First and foremost, you’ve got to stabilize the ship. You can’t do everything you want all at once. In business, especially with a turnaround, it’s about what you can afford as an organization. What are we able to execute properly? You can’t overextend yourself and take on too many initiatives – you have to prioritize. What’s the key to a successful turnaround? It’s taking a pragmatic approach, coming in to an organization and making sure that the messaging is very clear, both internally and externally. When I first take over a company, I go visit all the key customers, because I want them to know that we’re here and that we’re staying in business. A lot of times they’re wondering whether they need to switch to a new company that can sell a similar product because a new CEO has come in, and you really have to cement that relationship and establish what they expect and let them know that you hope to improve upon it. Give us a year or two and see. Give us a year or two and see what you think of the relationship then. Give it that chance. There’s a lot of cheerleading both internally and externally. Since the Qualstar takeover, do you consider yourself an activist investor? I was only an activist investor once, and it wouldn’t have been my first choice. It was out of default, because I had to protect my investment. An entity I controlled was the second-largest shareholder at the time, and when the founder basically quit, I felt there was a huge void and started the proxy contest. The way I look at it, nobody likes to lose money, and you have to protect your investment. But for Qualstar and Interlink, I’m in it for the long term. If I execute properly over time, I think that’s going to be the best return on investment for shareholders. How did you prove yourself at Qualstar, having come in an activist investor? I had to communicate well with the team, and to go above and beyond. They saw by example – I was the last person to leave the office, for instance, or at a trade show when boxes were being put down, I was there moving them with everyone else. You have to be willing to roll up your sleeves. What was your life like growing up? I grew up in Queens and Manhattan. I was definitely influenced by the city lifestyle to be a survivor, and I think that has served me well throughout life. I had a great family, with very supportive parents and very good siblings. I’m the youngest of three, and I think that teaches you to be strong. My parents influenced me a lot in terms of ethics, character and commitment. What were your parents’ careers? My father was a retired schoolteacher. There were very good lessons learned not just at school but at home. Mom was a homemaker but decided when I was a teen to go back to school to become a physical therapist. It was interesting to have your mom going to college and sharing college stories with you when you’re a teenager. For her first two years she got an award for being a perfect student. That kind of set an expectation even though later in life I chose a more business route than an academic route. Were there early experiences that piqued your interest in finance and business? As a very good student, but one who was restless, I ended up going on an internship program my senior year of high school to work for Prudential Securities. That got me exposed to the business and finance world, which just fed an interest I had that had started a few years prior to that. Where did you take that passion next? I went to Queens College but I dropped out to work on Wall Street for Drexel Burnham (Lambert), which at the time was a very well-known firm and later for other reasons – you know, junk bonds, (Michael) Milken. It gave me exposure to Wall Street at a very young age, and since I already had the internship experience I realized this was something I was interested in. It kept snowballing to the point that I started my investment firm when I was 25 years old. What did your firm focus on? Our niche was working with existing public companies like Qualstar, where they needed additional capital, help from an M&A standpoint and a more hands-on approach than they would get if they were a large corporation with a large-bracket investment banking firm. What kind of need did you see with these companies? There was a void because if you were already public, you weren’t this hot initial public offering – a hot new company with hot new technology. A lot of Wall Street wasn’t pursuing existing companies, and the larger firms, unless the transaction was a certain size, for them the economics didn’t make sense. We saw a great niche to pursue existing companies. If I could work with them to raise additional capital, to help them with mergers and acquisitions and really understand their business and help them get their business to the next level, it would be a very lucrative niche, which it was. What is it like running two of the region’s biggest public companies? My wife sometimes thinks I’m crazy. I look at it that I leverage relationships and contacts for both companies in whatever part of the world I’m in. If I’m taking time to go to Japan, I can go visit key customers for each of the companies. The benefit for both companies, and independently each board looks at it, is that they’re getting shared expenses. Economically there’s a really compelling advantage where it really saves both companies money where appropriate, but more importantly it’s really leveraging off their relationships and experiences. What’s a good example of this? For instance, we open a door for N2 Power because Interlink has a customer that could buy power supply, or N2 Power has a rep that could introduce Interlink sensors to a customer. So there’s a lot of cross-pollination opportunities that you get having two businesses where even though they’re very different products, some of the sales channels are very synergistic. How do you handle the stress? Balance – spending time with my kids, incorporating cardio activities, eating well – are all part of the equation. Colleagues kid with me because I tend to eat very healthy, but that helps me with my routine and scheduling. On the road I make good decisions. It’s a big commitment, but I think the biggest thing is making sure that there’s the balance, because if you’re balanced I think it influences the business. What factors clue you in that someone will make a great team member? I see it pretty quickly. I think that goes back to my roots as a trader, because you have to rely on your instincts. Your instincts have a very big influence on your right decision or wrong decision when you trade, so you have to make an assessment pretty quickly. Also, you can tell just the way they handle different tasks and their overall job. You can see the effort in little things, like when they take it upon themselves to do something. How would you describe your management style? Collaborative and hands-on. You have to experience things yourself. The part that’s tough is you can’t get people to see the long-term vision all the time. Most of us aren’t wired to think three to five years down the road – we’re thinking on a day-to-day basis. Setting objectives and sharing them collectively is very important. What makes you good at your job? Passion. Hands down. I also make prudent decisions and take calculated risks. I really look at statistically, if we’re moving into an area, exactly what it’s going to cost us. You can’t control everything, but getting a good grasp of the numbers is very important. It goes back to being realistic, setting the long-term vision and executing on it. What is the best career advice you have ever received? Make time for your family. I know it sounds corny, but it’s a theme I’ve seen among successful people. In my former life in investment banking I was around successful CEOs in different industries and at different companies, and I had the chance to meet some of the really top household names in the business world. Having family balance was the common trait among them.

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