VELOCITY - DEE JACOB [154]
On January 3, 2008, the price of Winner common stock closed at $82.02, the highest it would ever be for the coming year. From then on, the price began a descent that was nauseating for any brave investor stubbornly holding Winner shares. By early April, it was hovering around $57 per share; by late April, the price would not rally above $39 – a drop of 50 percent in four months. And it would get worse.
Through the spring and summer, the full exposure of the Winner financial services group to mortgage-backed securities and other derivatives became known, and the stock continued to tank. But the financial services mess, though the main cause of the decline, was not the only cause of Winner’s misfortunes. All those years of borrowing to finance expansion and to cover up mistakes had saddled the corporation with debt, and servicing this debt was now like a poor swimmer being caught in an undertow, as cash flow fell and cash reserves were drained. This was, after all, the same management culture that had produced Randal “the Tornado” Tourandos, master of the short-term pop. There were other, less-gifted tornadoes spread all through Winner. When faced with anything short of a bullish economy, they had little idea what to do. For 2008, the business strategy of nearly every Winner company seemed to consist of across-the-board layoffs, ever more draconian cost reduction, and wait it out. Hope for better times, like, soon.
It was in this environment that Hi-T Composites turned in one of its best years ever. While all the other Winner executives by midyear had slashed their forecasts – and were joking darkly about slashing their wrists – Amy Cieolara modestly reduced the forecast for Hi-T, and then beat it handily.
“How?” Nigel Furst asked her at the end of the third quarter. “How are you doing it? These numbers are on the up and up, are they not? Every other president in my group is either declaring losses or in any case is way behind in comparisons with other years. Here you are, slightly ahead of where you were this time last year, in a much better economy, and a mile ahead of where you were a few years back.”
The answer, as Amy explained, was not one-dimensional. But the Reality Tree strategy for the future that she and others had put in place was still working. The alliances Hi-T had forged with certain of its customers to help them beat their competitors were now paying off on both sides – enabling the best of Hi-T’s customers to gain share as their competitors withered in the bad times, and strengthening Hi-T’s own sales. Likewise, any customer who had taken advantage of Hi-T’s vendor-managed inventory capability was in a stronger position because of it. Hi-T’s own time-based inventory replenishment was keeping its own inventories quite low compared to historic levels – a key advantage in these recessionary times. Encouraging customers to opt for standardized products had helped reduce costs on both sides of the buyer-seller fence. All of those were working well.
And then there was dumb luck. Or more to the point, there was capitalization on dumb luck. Sarah Schwick had had a few trusted people at F&D go through the research archives, and among the few gems in the rough they had turned up was an old, yet innovative design from the 1980s for a composite with photovoltaic properties. The design had been shelved back then due to high manufacturing costs and minimal market appeal due to the then-low costs of fossil fuels. Times had changed. Amy ordered a manufacturability analysis, and the Juicebug, as it came to be code-named, was now much cheaper to manufacture and the potential market, for the price, absolutely huge. F&D’s Dr. Marv had a test quantity manufactured, then took this to a solar company in California, which ultimately ordered 1.7 million of them from Hi-T to be used in a pilot project.
Garth Quincy and the rest of the Hi-T sales force scored their sales gains. Even in a recession, there are secular growth trends – and, just as with the Juicebug, renewable energy