New Products, Better Global Economy Make Life Easier For Fluke Recent Efforts To Refocus Company Pay Off For Electronic Instrument Maker

Fluke Corp., which suffered through stale markets, Europe’s recession and employment cutbacks, has bounced back with record orders for its electronic test tools in the company’s latest quarter.

“We’re kind of on a roll here,” says Bill Parzybok, chairman and chief executive officer.

“They’re doing great,” said analyst Bob Toomey at Piper Jaffray in Seattle. “I would say the effort the company has taken over the past couple of years to refocus and redefine their markets, and their tremendously successful effort on new product development, is really paying off.”

Last month, Fluke released thirdquarter results showing profits of $4.2 million, up 77 percent from the $2.4 million for the quarter that ended Jan. 28, 1994. Revenues also perked up, to $99.1 million from $87.6 million.

But what Parzybok was most proud of were the record orders, up 19 percent to $104 million.

“We’ve had a lot of new products in the last couple of years,” he said. “All of these have kicked in and contributed to growth.”

Fluke is a market leader for handheld electronic test instruments, such as multimeters, used to check electrical circuits for such things as voltage and resistance, and oscilloscopes, which show electronic quantity as a wave form on a screen. Fluke’s multimeters with digital readings long have been standard equipment in technicians’ tool kits.

But the start of the 1990s was tough.

Fluke ran into “Europe’s worst recession since World War II” just as it was becoming more dependent on international sales, Parzybok says. Other international markets, such as Japan and China, also were weak.

The company also was moving away from its traditional test and measurement markets, which were declining in the late 1980s and early 1990s, and beginning an extensive and costly search for new products, Toomey said.

Two years ago, Fluke laid off 125 workers at its Everett headquarters because of slumping sales. Managers took pay cuts and some hourly employees took unpaid days off.

About the same time, Fluke paid $41.8 million for the test and measurement business of Philips Electronics N.V. of the Netherlands. That made the company even more sensitive to Europe’s economy and required some European job cuts. But the move also gave it Philips’ ScopeMeter test tools and other product lines, Philips’ name recognition, and sales and service networks in Europe, Toomey said.

As is often the case, buying low when business is rotten has paid off as conditions improve, the analyst said.

“The timing was good on that one,” he said.

More important, though, was Fluke’s introduction of a broad new line of handheld instruments, including some with brand new applications. These niche products typically have higher profit margins and fewer competitors, Toomey said.

Fluke spends about $35 million a year to invent new products, Parzybok said, and has introduced 11 new devices this fiscal year alone.

The company paid for project teams “that went out and looked at different markets and customers to develop new products that were focused on customer needs and solving customer problems,” Toomey said.

Among those are instruments to install and test local area networks of personal computers for businesses, and electronic tools for automotive diagnostics and industrial-process applications.

In most cases, Toomey said, “product acceptance has been just outstanding.”

Fluke has 2,495 employees worldwide, 1,373 of them at Everett. That’s down considerably from the 1,797 who worked at the Everett plant in January 1992, but employment has been fairly stable the past year, spokesman Gary Ball said.

Fluke has improved its earnings for seven consecutive quarters, and expects to do the same for the eighth, Parzybok said. While he’s pleased at that trend, he’s still not happy about Fluke’s profitability.

“It’s still four-ish percent and stuff and that’s not good enough. … On $100 million in sales you should be able to take more than $4 million to the bank.”