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GenRad Sees Balanced Revenue Growth in 2001

9 November 2000

GenRad Sees Balanced Revenue Growth in 2001; 'New, Solid Foundation' Cited by Chairman

    SAN DIEGO--Nov. 8, 2000--GenRad, Inc. , a leading developer and marketer of electronic performance and quality-assurance solutions, today told an audience of investment professionals here and worldwide via Webcast that it expects 2001 revenues to grow at a rate of between 15 and 20 percent.
    The Westford, Massachusetts-based company made the announcement in a presentation entitled "Creating New Value" delivered at the annual American Electronic Association meeting here.
    "We are successfully concluding our second quarter of re-energizing GenRad. This period has been characterized by our keenly sharpened business focus, our significantly heightened sense of urgency and our total commitment to precise execution," said Robert M. Dutkowsky, Chairman, President and Chief Executive Officer of the 85-year-old company.
    "The significant strides we have made during the past two quarters have created a new, solid foundation upon which we expect to build our 2001 performance," Dutkowsky added. "We anticipate revenue growth of 10 to 30 percent across our four lines of business for 2001."

    Growth Opportunities

    GenRad's Board of Directors named Dutkowsky to the company's top three positions in April, 2000, and he began redirecting the company's energies toward new growth opportunities with a strong emphasis on expanding its portfolio of hardware, software and service solutions.
    At the outset of his tenure, Dutkowsky eliminated a dated vertically-aligned business structure and created four new lines-of-business, which are designed to provide GenRad with a go-to-market structure that better aligns its value proposition with the way its customers do business. The four new businesses are Process, Functional, and Diagnostic Solutions, plus a global Service and Support structure that also serves as a distinct profit center.
    Dutkowsky also created a focused senior management team, 80 percent of whom are either new to the company or have new responsibilities.
    Dutkowsky told investors worldwide that the company has changed its compensation plan by offering performance-based line-of-sight bonuses to virtually all employees and by creating a company-wide employee stock option program. GenRad has also implemented a worldwide Enterprise Resource Management [SAP] system, hired a business-visionary to jump-start its global software business, and named a new global sales vice president based in the United Kingdom to more effectively manage the increasing impact that Europe and Asia are having on company revenues and profits.
    During his AEA presentation, the chairman stated that the new Solutions organizations are "customer-embracing in their design and will provide our clients with the full-scope of testing and performance-assurance solutions they need to accelerate their deployment of leading-edge technologies. Now, the electronics assembly industry has a true solutions partner who will help ensure its ability to deliver excellence and innovation through electronics."

    Product Demand Continues

    "Worldwide demand continues to be strong among our global markets," Dutkowsky told investors. Those markets include original equipment manufacturers [OEMs] and contract manufacturers [CMs] of printed circuit boards integral to today's rapidly growing and technologically driven industries. GenRad equipment is used in the manufacture of Internet and private network switches and routers, mobile and other wireless devices, PCs and laptops, enterprise servers and data storage technology, medical devices such as pacemaker implants, and electronic diagnostic systems.
    Major GenRad OEM customers include: Sun, EMC, Motorola, Nokia, Alcatel, Ford, Cisco, Dell, Compaq, and others. Major CMs include: Solectron, Celestica, Jabil, SCI, and others.

    4 Units' Growth Expectations

    At $194 million, the Process Solutions unit is GenRad's largest, and represents 55 percent of the company's estimated total 2000 sales of $348 million. The company stated that this unit is expected to grow revenues in 2001 by about 15 percent.
    The fastest growing unit is GenRad's smallest, Functional Solutions. With 2000 revenues expected to be about $16 million, 5 percent of the company's total revenue. However, GenRad management believes this unit could show 30 percent revenue growth in 2001.
    The Diagnostic Solutions line of business is focused on the transportation segment, where the company sees a large opportunity focused on the increasingly important and rapidly growing independent auto repair market worldwide.
    While this unit's current business is dominated by a contract with the Ford Motor Company to manufacture and deliver an advanced Worldwide Diagnostic System [WDS] to its dealers worldwide, future expectations are based on optimism for the auto service after-market.
    Dutkowsky also told the investor audience that while the auto industry as a whole is expected to grow at about a 1- percent annual rate, the auto electronics segment expects a 40-plus percent growth rate.
    GenRad's Diagnostic Solutions' revenues for 2000 are expected to be about $66 million, 19 percent of total revenue, with 2001 growth anticipated at about 10 percent.
    With its fourth unit, GenRad places a renewed focus on delivery of Customer Service and Support. Dutkowsky believes that creation of this business unit will improve customer relationships while creating a new, significant and growing revenue stream. Heretofore, many of the value-added services provided by this unit have either been built into other company functions or were not billed.
    GenRad stated that this unit will contribute about $73 million in fiscal 2000, 21 percent of total company revenue, and is expected to show 2001 growth of about 15 percent.