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Applied Concepts keeps powering on

Maria Carbonaro
Business Journal - Central New York, The

Nov 13, 2008 19:00 EST

TULLY - Stephen Soos founded Applied Concepts, Inc. (ACI) 10 years ago and was its first employee.

Today, Soos is also a vice president and director of engineering at the company. Celebrating its 10th anniversary this year, ACI says it is a healthy company that has shown steady growth over its lifespan. In its first five years, ACI grew from one to 40 employees. In the five years since, its employee count has remained fairly steady in the low 40s. Soos identifies his goal for employee count as "50 is the magic number."

The company manufactures DC to AC inverters, which are the power source for flat-panel display backlighting applications that light up LCD screens. Its products can be found in the drive-thru menu boards at Burger King, airport display screens announcing flight arrivals and departures, the computers in police cars, and the cockpits of airplanes, to name a few.

Soos worked for Smith Corona in Cortland during the 1980s, and then left to work for a company in Endicott, which he did not name, that developed similar technologies to ACI. Soos spent about 10 years down there and then wanted to start his own company. An acquaintance he'd worked with at Smith Corona introduced him to a man who had the money to invest in the startup and also had the building space in Tully. His name was Rick Shafer, and he had the two key elements financial backing and the location at 397 State Route 281 in Tully. When boos and Shafer talked, Shafer got enthused about the manufacture of the inverters. Shafer already was a part owner in a couple of small businesses. So he liked the idea, and Applied Concepts, Inc. got started in 1998.

Gary Nelson joined the company as president and CEO in 2005. Shafer is a major shareholder and partner, along with Nelson and boos. The precise breakdown of percentage of shares per partner was not provided. Shafer is not an officer, but he and boos are the original founding shareholders.

Nelson and Soos got together when Nelson did some consulting for ACI in 2004. Soos describes how Nelson came to be the company's CEO like this: "We had some kind of a nasty business situation with one customer, and he [Nelson] came in to help us out, and we really needed some leadership experience, financial experience, so it just kind of worked out over the next year."

When Nelson hooked up with ACI, he was leading a company he'd been with for about 18 years - Buckbee-Mears in Cortland, serving as its president. The Cortland-based business, which made aperture masks used in color picture tubes, had been struggling for some time. Worldwide production capacity continued to exceed demand for these products. In addition, the manufacture of aperture masks and picture tubes had been moving away from North American and Europe to Asia for some time.

As a result, Buckbee-Mears' Cortland facility was closed in June 2004, and Nelson began looking for a business in which to invest, when he connected with Soos and Shafer. Nelson consulted for ACI the first year, and during the second year, he came on board ACI as the CEO.

Nelson said he didn't want to leave the area, so it was a great deal for him since it allowed him to stay in town.

ACI started off small, but its revenue growth took off during the first five-year period. Soos explains the firm's revenue-growth trajectory by rattling off, "a couple of numbers just off the top of my head ... $27,000 in sales the first half of year; and about $600,000 the second year (full year); and I think $1.1 million the third; and it was like $1.2 [million] the fourth; $1.6 [million] the fifth; $2 million the sixth. Something like that."

Since then, growth has continued with the company "on track for almost $5 million [in revenue] this year." Soos says. The company has never posted a revenue decline.

How will the company weather the current economic downturn? The current economic situation isn't having any impact on the business, says Nelson.

"Our business tends to participate in some pretty insulated markets like military, medical, other ruggedized applications, some of which are somewhat removed from an initial consumer reaction to a recession. We don't really participate at all in any kind of consumer products," Nelson explains. He adds that ACI has seen some small reactions so far in some of the niche private aviation, or private marine, yacht-type applications, but other than that, the core business is pretty strong.

Nelson says the other thing ACI has going for it is its growth strategy focused on increasing market share and moving into some new product lines that have much greater revenue and profitability potential. So even in a flat or a down market, it has the potential to continue to grow its sales.

The product lines are similar to what it already carries, but instead of relegating itself to the power supply and the back-light assembly, it is actually stepping up into the complete backlight assembly including the power supply and the light sources. And it's the transition of technology in the market, he adds, going from cold cathode fluorescent tubes to solid state LEDs that's enabled ACI to do that.

As for the future, ACI plans to continue to build on the complete backlight assembly strategy. The company is even looking into further building on it by taking on other functions and other improvements to the display itself like touch screen or bonding to the face of the panel to enhance its contrast ratio or brightness. It is considering the possibility of creating an enclosure for the entire panel and selling a branded enclosure and just continuing to move up the chain from the start of being the power supply all the way to possibly supplying completed LCD panels with enclosures that have the ACI name branded on it.

The partners say they would like to reinforce to the politicians how helpful it would be to have strategies in New York State that would help businesses their size. Nelson says, "I think it's one thing to have a new business start - they always seem to show up for the ribbon-cutting ceremony in those cases - but in order for businesses to continue to grow, they need some incentives in capital to be able to expand in some areas. I think there are a lot of businesses out there who have demonstrated that they have a viable healthy business, but that doesn't mean they don't need help of some sort by the state."

One of the other things, ACI is concerned about is the difficulty of recruiting professional people to our area, especially engineers. Nelson explains, "I think the two biggest detractors from our ability to recruit is people think of the weather around here and upstate New York, and who would ever want to live in this area, and then the other is constant bad press about the high cost of doing business, high taxes, high this, high that. Why would anybody ever want to come here and try to start a career?"

Soos adds, "As you know, historically, New York was a huge manufacturing state. It's certainly transitioned, but there are a lot of small businesses and a lot of people that are natives that love it here, and I think that perception sometimes is truer than truth. We find talent that's already been here and knows what we do ... and we don't even get a chance to interview them because they already have a negative opinion of the area."

BOTW PROFILES

Gary Nelson

President and CEO

* Age: 46

* Education: Bachelor's degree in accounting from SUNY Geneseo, and an M.B.A. from City University

* Residence: Homer

* Family: Wife Deborah, and three children

* Year became CEO: 2005

Stephen Soos

Founder, vice president, and director of engineering

* Age: 48

* Education: Bachelor's degree in electrical engineering, Ohio Institute of Technology