When The Walt Disney Co. decided to retire the call letters of legendary area radio station KRLA last fall, Dave Armstrong knew he had to have them. “So when they became available, we got them,” said Armstrong, who was then general manager of Glendale radio station KIEV. The rechristening of the former KIEV into the new KRLA 870-AM became official on Jan. 1 and the station’s fortunes have been headed north ever since. “It’s not just because of the call letters, but the fact that people are responding to our programming,” said Armstrong, general manager for KRLA and its sister stations, KKLA and KFSH, all of which are owned by Camarillo-based Salem Communications Corp. KRLA’s new all-talk format and the addition of longtime radio personality and former television talk show host Dennis Prager from KABC-AM have pushed the station’s ratings to double its previous average as KIEV at the end of 2000. The station had been mired near the bottom of the ratings heap, with an average .6 rating, according to the Arbitron ratings service, when Armstrong and his staff set about turning the old KIEV into the new KRLA. Today the station sports a 1.3 rating, double its numbers of a year ago, and has moved up to the middle of the pack, ranking 25th out of 43 radio stations in the Los Angeles market. Don Barrett, former KIQQ Radio general manager and local radio watcher, says he’s not surprised. “KRLA is a historic radio station that a lot of people remember from their youth,” Barrett said. A pioneer rock and roll radio station in the 1950s and 1960s going so far as to bring the Beatles to the Hollywood Bowl in 1965 and 1966 the station went on to become an oldies music station featuring legendary rock deejay, Dick “Hug-gy Boy” Hugg. “People in Los Angeles have a good feeling when it comes to KRLA and we wanted to take advantage of that,” Armstrong said. After the Walt Disney Co. acquired KRLA last November and agreed to change its call letters to KSPN to reflect its ESPN Radio Network affiliation, Armstrong filed a successful request with the Federal Communications Commission to use the famed call letters and replace the venerable KIEV with the former rock station moniker. “KIEV had been around since the ’30s, but we found out that it didn’t really stir any emotions in people Not the way that KRLA did,” Armstrong said. As KIEV, the station was a Glendale mainstay that served for decades as the radio home for famed personalities like comedian Don Rickles, who got his start on radio, Dick Whittinghill and Sam Benson. What had evolved into an oldies station became all-talk after Salem acquired it in 1998. The station’s power output doubled to 20,000 watts last year and its talk format began reaching a larger audience just as its new call letters became official, Armstrong said. Nearly nine months since the changeover, KRLA’s revenues are up by 60 percent, Armstrong said, citing the popularity of Prager’s show and the station’s increased efforts to market itself as the “New KRLA.” With the addition of film critic Michael Medved and outspoken former newsman and radio personality George Putnam, the station has gained a solid foothold among local radio listeners, Armstrong said. As the station’s listeners grew, its demographics changed. A year ago, 75 percent of the audience was over the age of 65. Today, Armstrong said, 65 percent are between 35 and 64. “We were very lucky to get Dennis from KABC (radio), and that his audience followed him over,” he said. Prager, whose program is syndicated nationwide, said KRLA was the ideal situation for him after years with KABC-AM. “It’s a national program, but I feel very free to discuss the Valley’s issues and not just the news and other issues that come up, and that has improved the show considerably,” Prager said. The former television talk show host said he left KABC after the station insisted he keep his station locally-oriented. “KABC said ‘OK, we would like you to stay here, but we don’t want any daytime syndicated shows,'” Prager said. “I thought it was beyond foolish because the average listener doesn’t care if there were other listeners in other cities.” Armstrong said advertising revenue for KRLA averages more than $300,000 per month. Salem Communications, which owns KRLA and 80 stations around the country, projects revenue for this year at about $138.5 million for a 25.8-percent increase from the $110.1 million in 2000. On billboards and in bus ads and newspaper advertisements, the company has touted its star attractions: Prager, Medved, Putnam and former Ronald Reagan advisor Hugh Hewitt. But ever-mindful of marketing efforts, Armstrong insists most effective has been its community involvement, lending KRLA’s name to efforts to aid the homeless and to keep a battered women’s shelter from closing earlier this year. “We told them we wanted to get involved and asked how much it was going to cost to keep it open,” Armstrong said. “They said $320,000 and in two months we raised the $320,000.” With the help of its on-air personalities touting the campaign, the shelter stayed open and Prager and his colleagues soon realized the power of talk radio. “It gets people involved in their community. It’s not just radio to them,” Prager said.

Valley secessionists claim there is a move afoot in the city council chambers to replace Alex Padilla as council president and in Padilla’s northeast Valley district to recall the 28-year-old councilman from office. The flap stems from Padilla’s decision last week to remove City Councilman Hal Bernson of Granada Hills from the panel weighing the pros and cons of secession. Richard Close, chairman of Valley VOTE, said Thursday he’d heard from at least two council members who said they were considering a special vote to replace Padilla as president of the council, a position he won 9-5 in July, beating out 14-year veteran Councilwoman Ruth Galanter. Close also said Valley VOTE is seriously considering whether to help voters in Padilla’s district organize a recall drive. For 20 years Bernson served as a member of the Local Agency Formation Commission (LAFCO), the nine-member panel scrutinizing Valley VOTE’s application for a breakup. But last Wednesday Padilla abruptly removed him from the panel and replaced him with City Councilwoman Cindy Miscikowski, a staunch opponent of secession whose district includes portions of the Valley. Padilla appointed Bernson a LAFCO alternate, which means he cannot vote on secession-related issues unless Miscikowski is absent. Bernson said he intends to have the city ethics commission look into whether Padilla overstepped his legal bounds as the city’s number-two man. But for secessionists the issue is more than just a legal one. They say Padilla, opposed to a breakup, has reneged on a campaign promise to remain neutral on the issue. “This is slap in the face for Valley residents and those who want to see the issue on the ballot next year,” said Close. “To have Alex do this is unforgivable.” In the past Valley VOTE has declined to release a list of its financial contributors, claiming its intentions were primarily educational, not political. If the organization were to become involved in the recall of a city councilman, that status could change. Padilla said he appointed Miscikowski because of her experience heading a city commission and work on the city’s budget safety committee. “I think her experience is very valuable,” said Padilla. ” I also think she’s very moderate in her approaches.” Ali Sar, Bernson’s head of media relations, declined to comment on whether a petition for a recall was a real possibility. “We can’t comment on something we have no knowledge of,” Sar said. Although both Padilla and Miscikowski say her appointment was not a political quid pro quo, secessionists say it represents a clear attempt by Padilla to return a political favor and at the same time, punch a hole in their cause. While Bernson’s official position on secession is said to be neutral, he’s long pushed to fast-track a decision to put a secession initiative on the ballot in 2002. Miscikowski has said she would oppose secession as a voter, but as a councilwoman would remain neutral. LAFCO commissioners are appointed for four-year terms. Bernson’s term was set to expire in May. Padilla downplayed the notion that he was trying to derail the process.. “I believe in the democratic process,” said Padilla. “LAFCO is structured the way that it is for a reason and we all play by those rules. I will highlight that the city is in a time of change, and sometimes change makes people uncomfortable.” Close said Valley VOTE would likely make a decision on whether to partake in a recall effort over the next couple of weeks. He said the voters would only need 11,000 signatures for a recall.

Jeff Schwartz Title: Manager, West Coast operations for McDonald’s Corp. Previously Los Angeles regional vice president, based in Woodland Hills Age: 47 Most admired person: My father, Don Career turning point: Becoming a regional manager in Arizona Favorite burger: McDonald’s double cheeseburger Personal: Married, two children McDonald’s is the only employer its West Coast manager has ever had These days it is hard to find a senior-level executive at a $14 billion company who can say he or she is with the only employer they have ever known. But Jeff Schwartz’s career with McDonald’s began in 1969 when, at the age of 15, he took a job at a McDonald’s restaurant in Minneapolis. Since 1996, Schwartz has been Los Angeles regional vice president for McDonald’s Corp., overseeing 380 stores and roughly 17,000 employees from regional headquarters in Woodland Hills. Schwartz previously served as regional vice president in Phoenix for six years, and before that, as director of operations in Minneapolis. Schwartz’s Los Angeles region, one of 38 such divisions company-wide, includes all of Southern California west of the 605 Freeway from the Mexican border north to Paso Robles. Over the last decade McDonald’s has relied on special promotions, many catering to specific ethnic markets, and cost-saver deals for the consumer, such as 29-cent hamburger days, to hold its position as the largest food service retailer in the world. The company now has 29,000 McDonald’s restaurants up and running, serving roughly 45 million people a day in 121 countries across the globe. Schwartz said the company has worked to beef up sales here and abroad through the addition of those added promotions and programs aimed at streamlining operations and making service more efficient. McDonald’s has reported flat revenues for the last three quarters, the byproduct of a slow economy, but also because of recent threats from the spread of Mad Cow disease in Great Britain and staunch opposition to store expansion in some European cities. He was recently promoted to the position of restaurant support officer for the Western Region and moved last week to corporate offices in Irvine. Prior to his departure for Orange County, Schwartz spoke to Business Journal reporter Jacqueline Fox about the company’s strategies, where store growth here in the Valley stands and his plans for his new position. Question: Of the 380 stores in your region, how many McDonald’s stores are in the San Fernando Valley proper, and how do their sales compare to the region overall? Answer: There are 43 stores in the San Fernando Valley, which includes Glendale and Burbank, and sales here are very strong. Of those, about 20 are company-owned and the rest are franchises. We see the Valley typically exceeding what the average region does in sales per quarter, about 10 percent, so we feel there is a tremendously strong market here. Q: How many new franchises have opened up in the region since you came to Los Angeles, and how many are planned over the next five years, specifically in the Valley? A: We’ve added approximately 50 stores in the region over the last five years, and in the Valley we’ve put in 10. But we think there should be more here in the Valley. There is great opportunity here for growth and we think that’s in part due to the fact that we are underdeveloped here. I’m not sure of the number of stores that we plan for the Valley, but we are very bullish here and we currently have new franchise land agreements in the works. Q: McDonald’s is pushing a Latin-influenced menu in Florida and testing a McCafe gourmet coffee house and McTreat dessert shop in the Midwest. What concepts have been introduced here under your leadership and have they been successful? A: We introduced the Big and Tasty lettuce and tomato sandwich here about four years ago and it was wildly popular, so we will continue to promote that product at different times of the year. A couple of years ago we sent executives to Mexico City to see how the McDonald’s menus there were working, and then we later developed our own “Fiesta Menu” which caters to our Latin market. We ran that promotion for about three months and it’s also been very popular. We’ve kept the chorizo breakfast burrito on the menu permanently because sales for it were so strong. Q: Do you think Southern Californians want new items? A: Absolutely. The promotions we’ve introduced here are highly popular, and particularly so here in the Valley. We’ve seen tremendous response to specialty items and to what we call our “outrageous value” promotion, where we offer items like the 29-cent hamburgers. While our traditional items, like the Quarter Pounder and the Big Mac, remain very popular, we are constantly listening to our consumers about what they want and where they would like change. So we are aware of the need to offer variety. Q: Sales for the company overall are said to have remained relatively flat over the last few quarters, particularly in Europe where there has been a threat to the industry with the spread of Mad Cow disease. What’s been done to turn that around? A: Our strategy focuses on three different things: value, food and service. We’ve just implemented our “Made for You” cooking line at all operations, which is focused on providing fresher products. We’ve used new technology to produce every sandwich one at a time, as opposed to making several ahead of time in large batches. So our food scores are up dramatically. We also have launched a 30-second drive-through promotion in certain areas here in the United States, which offers a free Big Mac if your meal isn’t ready in 30 seconds. So, with a focus on improving quality and service, while coming up with value-targeted promotions, we think we are doing all the right things. Q: How many Big Macs did you have to give away under the drive-through promotion? A: Plenty. But the point is we try. We consistently look for ways to let our customers know we are listening. Q: How many regions will you be taking on as restaurant support officer and how many stores and employees will that include? A: My new territory will include nine regions on the West Coast and Hawaii. (That includes roughly 24,500 stores and about 140,000 employees.) Q: What will your goals be in your new post? A: I think, frankly, my top goal will be to simply do my best to implement programs that represent the success we’ve had in Los Angeles as a whole. My entire mantra is “I want to be a great employer,” so I’m very big on role modeling and providing the kind of example I want all of our managers to take on.

Technicolor Motion Picture Corp., known for its state-of-the-art color film processing, has acquired Burbank post-production firm Miles O’ Fun, another step into the digital age for the one-time motion picture industry leader. As technology in the entertainment industry moves forward at breakneck speed, Technicolor is struggling to keep up. The acquisition of Miles O’ Fun is another step in Technicolor’s drive to diversify its business, remaining primarily a film manufacturing and processing company but moving further into the DVD manufacturing business and becoming a provider of digital cinema services. “Miles O’ Fun provided a complementary service for us and we reached a point two months ago that we decided it was time to expand that strategic alliance,” said Bob Beitcher, president of Technicolor Creative Services, Technicolor’s post-production unit. “(We can) help them build their business and they could help us build ours.” Terms of the deal which closed early this month were not disclosed. Miles O’ Fun is expected to continue to operate as a separate division of Technicolor. Technicolor and Miles O’ Fun have cooperated in some projects already The Lifetime Network’s “Any Day Now” and TV pilot “The Court” with Technicolor providing sound mixing and Miles O’ Fun sound editing and video post-production. Miles O’ Fun is considered one of the busiest digital post-production firms in the entertainment industry, with about 400 hours of episodic television scheduled this year. Beitcher said, with the deal, Technicolor hopes to grab more of the growing digital post-production business in Hollywood. Miles O’ Fun’s client list includes the CBS drama “Judging Amy” and ABC’s police drama “NYPD Blue” and “The Practice.” “Our goal in joining Technicolor is to bring our clients the technology, resources and expertise of the most important brand in content services,” said David Weathers, Miles’ co-president along with David Hankins. “Technicolor has some great ideas for shaping the future and we are thrilled to play a key role.” Nicolas Martin, an analyst with Aurel-Leven, says Technicolor’s move into digital media is in keeping with the actions of its competitors. Eastman Kodak Co. and Panavision Inc. are also moving forward with new digital technology, he said. “It’s a matter of time,” he said. “Print film will eventually be replaced by digital technology.” Miles O’ Fun was established in 1994 by former Todd-AO Studios producer Weathers, who formed the company with just two clients ABC’s “NYPD Blue” and CBS’s “Chicago Hope.” The following year, “NYPD Blue” co-executive producer Steven Bochco used them for two more of his series. Today, the company, with a staff of 12, has nearly 30 television series on its roster of clients with scores of mini-series, made-for-television movies and feature films, including last year’s “Miss Congeniality,” under its belt. The company has two Emmy nominations this year, for its work on “Anne Frank: The Whole Story” and “Dune.” Miles O’ Fun would not reveal sales figures. Technicolor’s net income last year, when it was owned by publicly traded British conglomerate, Carlton Communications PLC, was $216.6 million on revenues of $1.52 billion. Technicolor was acquired by French consumer electronics maker Thomson Multimedia SA in March for $2.03 billion. Technicolor’s move into digital technology began in 1998 with its acquisition of compact disk-maker Nimbus CD International, boosting the company’s position as a major DVD and CD manufacturer in the U.S., Beitcher said. The Miles O’ Fun deal follows Technicolor’s acquisitions last year of Montreal-based Covitec, a film lab and digital post-production firm, and Hollywood-based film lab Consolidated Film Industries. Those are only the most recent moves over the past three years for Technicolor, which has tried to place itself in the digital media market with acquisitions and strategic partnerships. In June 2000, Technicolor agreed to a joint venture with mobile telephone service provider Qualcomm Inc. to distribute feature films to movie theaters via communications satellites. Technicolor was founded in 1915 by Herbert T. Kalmus, who invented the film process that led to the first color motion picture. The company had been solely a film manufacturer and processor until 1981, when it began manufacturing videocassettes. Today, it is the largest processor of motion picture films and the biggest manufacturer of DVDs.

WonderWeb USA.com Core Business: Web site packaging Revenues in 1999: $75,000 Projected Revenues in 2001: $150,000 Employees in 1999: 1 Employees in 2001: 3 Goal: To develop a broader customer base Driving Force: Making the Internet more accessible and a more efficient tool for small business owners A former realtor in Valencia is building a business by helping other small business owners drum up their own Don’t call Craig Volding a webmaster. “I don’t like that term,” he said. The president of Valencia’s WonderWebUSA.com has been a small businessman for a quarter of a century. He watched as the Internet swooped in and leveled the playing field for all kinds of companies. He’s seen small businesses leveled by it too. “Many, many are very frustrated with their Web sites,” Volding said. “It’s just left a bad taste in their mouths.” “Get online” has been the mantra in American business for some time. Hundreds of thousands of florists and delivery services and coffee shops have paid billions of dollars to companies who promised to get them on the Internet. The problem is that, once there, using it to grow their businesses was not all that easy. For many small companies, once a Web site is constructed, it’s often impossible, without going back to the webmaster and forking over hundreds or thousands of dollars more, to make changes that only he or she has the expertise to make. Mistakes or out-of-date information go months or years without being corrected and opportunities to adjust to market conditions are lost. So Volding came up with his Remote Control product, browser-based editing that allows business owners to make changes to their Web sites without resorting to the sometimes very expensive services of a Webmaster. “A Web site is really a very simple thing,” Volding said. “It’s the words, it’s the art work and, finally, it’s what makes it actually visible, the technology. We take the technology and make it easy for the owner.” A realtor for many years, Volding started using the Web to drum up listings and buyers for his real estate business. Six or seven years ago, neither his nor anybody else’s use of the Internet was that sophisticated, but it gave him the slightest edge over competitors. “People were looking for some way to use their new toy,” Volding said. “So if they looked at 30 ads, you had something different from the other guy.” In the early days of the Internet, there were very few companies providing Web construction services and Volding learned how to do it as he went along. He started providing the same kinds of services for other realtors as well. “Then once the big players caught on to the fact that real estate was a good market, they had the marketing power and money to take over,” Volding said. “So we needed to diversify.” He started WonderWebUSA.com two and a half years ago, providing Web site templates that business owners could access themselves to change whenever they wanted. “This way, if you can get on the Internet and remember your password, you’re a webmaster,” Volding said. Cindy Sterling owns The Gifted Basket in Manhattan Beach, selling baskets full of gourmet foods and wine for corporate gifts and personal celebrations. “I had a traditional Web site and webmaster,” Sterling said, “but it was a very slow process and frustrating for me.” Now she can make seasonal changes to focus on products during Christmas, Valentine’s Day, etc. and even offer weekly or monthly specials if she likes. She and other WonderWebUSA clients pay a one-time construction fee ranging from $299 to $1,095, depending on the complexity of their sites, and monthly fees ranging from $49 to $79. In return, they get the template for their sites, training in how to manage them and all the assistance they need from Volding and his staff of two. Up until recently, Delta Scientific Corp. of Valencia used Volding’s company for traditional Web site management. The $18 million company builds and markets vehicle access control equipment, including security barricades for government buildings and other sensitive installations operated by the private sector. Recently, with WonderWeb’s help, the company took over management of its Web site itself. And Volding is trying to tap into the market provided by much larger companies, those that can easily afford more sophisticated Web management, but may not want to make the investment for certain reasons. Zacky Farms Inc., the second largest poultry producer in California and a $350 million business, didn’t need Volding’s help with Web design. But its human resources department did. A fairly labor-intensive operation, Zacky Farms wanted one part of its Web presence intended primarily to provide information to consumers that could be more interactive than the others, providing up-to-date information to job seekers and a way for them to submit employment applications. WonderWeb was able to develop a site that, Volding said, “they can pay someone $11 an hour to run instead of $60 an hour.” About half of the 150 clients WonderWebUSA has are still realtors and about half are in the Santa Clarita Valley. Still a very small operation, Volding expects revenues this year of about $150,000. His greatest challenge is drumming up more clients for a business that is designed to help others do exactly the same thing. “We don’t have the financing to mass-market,” Volding said. “We have to do it guerrilla-style.”

Established two years ago primarily to alleviate the area’s parking shortage and beautify messy sidewalks and streets, the Studio City Business Improvement District is facing tough criticism these days from merchants who say the organization is moving too slowly to attract customers. “Parking is the issue and people want that now, not tomorrow. So, it’s frustrating,” said Ray Franco, a local architect and president of the Studio City Improvement Association, which oversees the district. With a parking study on the table and lots of recommendations, ranging from a new parking structure to more on-street parking, the district is facing pressure from merchants who say the district must relieve the area’s parking problem now. The district was created in 1999 to improve and market the area. It is funded by an annual fee, averaging about $2,500 for most businesses in the district, on Ventura Boulevard between Colfax and Rhodes avenues. Matthew Dunn, president of the Dunway Co., which manages the 55,000-square-foot Studio City Plaza shopping center on the southeast corner of Laurel Canyon and Ventura boulevards, said his shopping center is hurt by insufficient customer parking. “At any one time there are 30 to 40 cars in our lot that should not park there, but that’s going to stop,” Dunn complained, vowing his own personal crackdown. “I have to spend $5,000 a month on the lot to chalk and ticket people to get cars towed because of the lack of parking.” Dunn, whose company last year paid $20,000 to the district, will see some relief after the district worked out a deal with the CBS Studio Center to allow shopping center employees to park in the studio lot across the street. But that’s not all Dunn and others want out of the business district. “We were promised more police and more parking and that hasn’t happened,” Dunn said. Franco agreed the district has been slow in responding to merchants’ needs. “The first year you’re getting organized and getting your feet wet and you’re getting to know what needs to be done. It’s just a slow process,” he said. But property owners interviewed remain angry over the district’s slow progress on parking issue, even though few would say so on the record. A parking study contracted by the Studio City Improvement Association, which oversees the district, was completed last year. But so far few of its recommendations have been put into effect. “The study showed that we had 1,000 parking spaces during peak hours but, unfortunately, they were on the wrong side of town,” Franco said, meaning several blocks west of Laurel Canyon. While a recommended parking structure is yet to be built the city has agreed in principle but has moved slowly with implementation the district has leased parking spaces in the CBS lot and at a nearby Dulux paint store. However, a planned free shuttle bus along Ventura Boulevard for customers and a proposal to add more on-street parking are still under consideration. But Franco says it is still too early in the process to say the district’s efforts to resolve the parking situation has been a failure. “We’re making good progress with the proposed parking structure and getting some spaces leased,” he said, “and I think merchants recognize that.” Art Ginsburg, owner of Art’s Deli on Ventura Boulevard, said the district has made a difference in other areas besides parking. “It’s little things like cleaning and trimming trees, but it shows that the property owners have pride in their community,” Ginsburg said. With a $287,000 annual budget, the district has allocated $64,000 for the parking issue, mostly for leasing spaces, said district Executive Director Lorena Parker. “Parking is an issue, but it’s not the only issue. Merchants are also concerned about clean sidewalks, lighting and safety,” she said. This year, the district plans to spend $50,000 on bicycle security patrols, $25,000 on sidewalk and tree maintenance, $20,000 on sidewalk cleaning and $103,000 on administrative and rental costs. “Beautification is really important to the merchants and that’s been one of our priorities,” Parker said. Last year, the district rejected the city’s plans to install new bus benches that would have featured advertising on the backing. Instead, the district purchased its own antique-style metal benches for bus stops. Susan Levi, executive director of the nearby Sherman Oaks Business Improvement District, said beautification is always a large part of any district’s activities. “You have to focus on streetscapes and keeping things clean,” she said. “But parking is always an issue on people’s minds and you have to work on that.” In Sherman Oaks, district officials discovered that people who could have used a nearby public parking structure generally weren’t. “People thought that it was private parking for this apartment building so it was underused But now we have new signage pointing to the structure and it’s helped relieve some of the parking problems,” Levi said. Meanwhile, a $3 million plan in Studio City to bury overhead electrical wires and add landscaping to the rear parking areas of a cluster of businesses along Ventura is still in preliminary planning stages, but Franco remains optimistic. “It’s going to take a lot of cooperation and some luck, but it can be done,” he said.

Ad Agency Remodels Interior To Promote Retail Know-how Don’t be surprised if the receptionist at Mosaic, The Ad Shoppe doesn’t speak to you when you walk into the company’s Sherman Oaks office. She’s a fake. So is the woman in the “library” pretending to reach for the latest issue of StoreS magazine. But there is nothing fake about the motive behind the theatrics, including the recently installed mock escalator angling up from just beyond the main lobby to, well, nowhere. Or the flying seagulls and hanging beach motif you’ll spot above some of the office cubicles. Or the cash register, Mosaic mints and “Retailoholic” note pads on sale near the receptionist’s desk. If your mission is to devise a creative, effective advertising campaign that entices retail consumers to reach for their wallets, then you’ve got to eat, sleep, breath and think retail, says Mosaic’s President Robert Charney. Which explains why, with advertising spending swirling around in an economic slump of its very own, Mosaic recently invested close to $100,000 to give its office space that “shop ’till you drop” kind of feel. Mosaic’s mood-boosting campaign is intended to send a message to its customers that, while it’s important to keep a lid on expenditures, sticking with a strong and creative branding campaign will carry companies through any challenges in the market that may lie ahead. Just past the front entrance is the Mosaic book store, where visitors can browse (or buy) publications such as “Store Planning,” “Competing With Retail Giants” and “Confessions of a Window Dresser.” Strategically placed impulse items sporting the Mosaic logo coffee mugs, baseball caps and boxer shorts bearing barcodes are also on sale. So are Mosaic T-shirts, golf balls, pens, pencils and mini-book lights. “What we wanted to do is differentiate our firm from other ad agencies, that’s important,” said Charney. “But it’s also ironic that a lot of ad agencies do what they do for a living everyday, yet very few know how to brand an image for themselves. So we are trying to set a mood here that not only induces our employees to get retail in their blood, but show our clients that we understand their market.” It’s too soon to say how much new or repeat business the “turn the tables on ourselves” campaign has produced, said Charney, but he added that potential and established clients alike have been receptive, and get the “we get it” approach. “We have not had one client that’s come through the door and not been blown away by the idea behind all this,” said Charney. “We know that this is working and we’ve accomplished what it is we’ve set out to do.” Pete Silver, editor of The Marketing Communications Report, a monthly published in Miami, said Mosaic’s strategy for driving sales and boosting client relationships should be an effective one. In fact, he said, although no ad agency he’s heard of so far has gone as far as putting in mannequins or a bookshop, the notion of practicing what you preach is catching on. “I think this is a very effective way for an agency to draw attention to itself, because the biggest challenge for advertising agencies is to differentiate themselves,” said Silver. “Now, obviously they have done something that can’t be duplicated without it looking like a copy cat.” Silver said he’d worked with a Vermont-based real estate agency that primarily sells buildings for bed and breakfasts that actually went out and purchased a B & B; of its own to prove knowledge of the market it caters to. He also likened Mosaic’s strategy to the fast-food chicken restaurant that aims to call attention to itself by dressing up an employee in a chicken suit and putting him or her in front of the store. “Anytime this is done, the message to the client is that something isn’t just being done somewhere in a dark, back room somewhere,” said Silver. “It sends the message that the company is trying to transcend the idea that they know everything and instead say we want to help our clients.” Mosaic has a client list that includes Valley-based IHOP Corp., Silver Star Motorcar Co., Thousand Oaks Auto Mall and Encino State Bank. According to Charney, retailers boasting of fairly good sales figures for the end of the second quarter have yet to feel the impact of the economic slowdown. He said, despite some predictions of a relatively strong fall and holiday season, come January retailers will feel the pinch. “I don’t think the layoffs in the tech sector have actually trickled down to the retail industry yet,” said Charney. “I think there is going to be a real slump beginning the first quarter of next year. But the good news is, those companies that have been prudent with their ad planning will do OK. We don’t suggest they go crazy, but they should maintain a certain level of prominence in the marketplace.” Ken Greene, president of the Thousand Oaks Auto Mall Association, said Mosaic has managed the ad campaign for the auto mall and Silver Star Motorcar Co., of which he is also president and general manager, ever since the ad agency went into business in 1989. “I believe I was one of Mosaic’s first accounts,” said Greene. “I stick with them mainly because of the personalized service; they are attentive to my needs and my customers. Other agencies have kind of told me what to do and not listened to what it is we would like to accomplish.” So far, Greene says, he’s maintained his ad budget, which usually runs somewhere around $1 million annually.

Summary Business: Oxygen systems manufacturer Headquarters: Chatsworth CEO: Thomas E. Jones Market Cap: $29.7 million Dividend Yield: N/A* Total Liabilities: $1.6 million P/E: No earnings Long-Term Debt: None * CHAD Therapeutics does not pay dividends Tom Jones could tell a few stories about business recoveries. The CEO of Chatsworth-based CHAD Therapeutics Inc., which manufacturers portable oxygen systems primarily for the home health care market, is just coming off a near-five-year slump fueled by cuts in Medicare reimbursements couched in the Balanced Budget Act of 1997. Under the measure, Medicare reimbursements to health care providers were cut by 30 percent. As a result, many of those providers also cut back on spending, including purchases of products like portable oxygen systems. Initially, CHAD could do little but watch as its customers slowly began to drop off. But a new line of products, in development through the last half of the 1990s, came onto the market last year, stabilizing the company’s bottom line. As a result, CHAD recently posted its first quarterly profit since 1998. For the quarter ended June 30, CHAD reported net income of $13,000, or zero cents per share, on $4.8 million in revenues, an improvement over the same quarter in 2000 when it reported a loss of $720,000, or 7 cents per share, on revenues of $3 million. “Clearly, the numbers speak for themselves,” said Jones. Driving the sales surge are two core products introduced last year. CHAD’s OXYMATIC 400 Series oxygen conserver, coupled with the TOTAL O2 Delivery System, helps conserve oxygen use and gives the patients the means to refill their own tanks when they are low, resulting in reduced operating costs for the supplier. Typically, CHAD’s customers are medical supply companies who then sell or lease the equipment, and supply oxygen, to health care providers and patients. Lower costs to the supplier make CHAD’s products more attractive to them. “If you can find a way to cut down on the number of times a patient needs a refill for their tanks, you’ve saved the supplier time and money, and that ultimately is good for us,” said Jones. CHAD was forced to lay off about 10 percent of its staff during the downturn, cutting roughly 12 employees. But as its new products have come on line and sales growth has returned, the company is back up to 100 employees the same number it had prior to restructuring in 1999. In hindsight, Jones said, the budget constraints imposed by the government actually helped weed out some of the company’s competition, putting CHAD in a stronger position to capture market share. “What happens if you are a home-care provider and your cash flow is cut, your immediate reaction is to quit buying products and make do with what you have,” said Jones. “Now, although we were once-removed from the cuts, and it hurt us, in some ways (that process) actually flushes out inefficiencies in the marketplace.” Tony Ramos, publisher of the Los Angeles-based Home Health Care Dealer magazine, agreed. “Oxygen equipment and delivery is the largest product in the home health care market, behind wheelchairs and crutches,” said Ramos. “So, when the cuts hit, everyone got whacked, and obviously anyone who was selling oxygen devices got hit big time. “But it also worked to slim down the marketplace, both on the supply side as well as the manufacturing side, and I think it put CHAD in an excellent position to gain market share.” Jones said that, if sales continue at their current pace for the rest of its fiscal year (which ends in March 2002), CHAD should have no trouble generating net earnings of between $800,000 and $1 million, or roughly 9 cents per share. The Medicare cuts also affected the industry in another way: Analysts who once touted the growing home-care market dropped their coverage like a hot potato when Uncle Sam got involved. “Analysts are people who chase after sunshine,” said Ramos. CHAD’s stock was trading at $2.65 on Friday, Aug. 3, 2001. But, if growth projections for CHAD are on target, Wall Street may want to take a second look. According to Ramos, the industry is poised for a comeback. And CHAD, said Ramos, will certainly be a company to watch as the industry recovers. “The cuts really affected the industry and many suppliers closed down,” said Ramos. “But manufacturers like CHAD were smart to wait it out and come up with new products that would please both sides of the industry: cheaper, more efficient to use.” Ramos said CHAD has also made a name for itself in the industry because its customers can count on the company for assistance in marketing the products to patients, through financial help with TV ad campaigns and brochures. “What makes CHAD a solid company is its commitment to its customers and a willingness to get involved with the marketing side of the industry,” said Ramos. “They are clearly a solid company, and their relationship with their suppliers is part of what’s behind that.”

You’ve read the same stories I have: The economy is staggering and people are losing their jobs. Since the beginning of the year, we hear, The Walt Disney Co. has let 4,000 people go. Last week, Power-One Inc. in Camarillo announced it would lay off 1,000 before the end of the year. That comes on the heels of the announcement that it had already fired 2,400, at a company that started 2001 with 7,500 employees. As you move out of the Valley and into the more rarified high-tech air, it gets worse. Motorola Cellular gets rid of 30,000, Nortel Networks another 30,000. In the first two quarters of this year, U.S. companies announced more than 750,000 layoffs. About 40 percent of those are in the tech sector, 30 percent in telecommunications. Accompanying an economic downturn that seemed to come much more swiftly than those in recent memory (at least, to those of us with memories long enough to remember others) is the rather cavalier way in which many of these layoffs are announced. The most recent rounds are little more than footnotes to unpleasant second-quarter earnings reports. Lucent Technologies Inc., for instance, posted a $3.25-million loss for the quarter and, by the way, at the same time happened to mention that 15,000 to 20,000 more of its workers would have to go. Thanks to a spin-off of its semiconductor and optical components division, it gets rid of another 17,000. By the end of the year, if all goes according to Lucent’s plan, a company that started the year with 123,000 employees will have 57,000. It all sounds pretty bad, especially given the number of telecom companies we write about in each issue; and given the surprising (to me, at least) fact that the jobs lost in the telecom world now exceeds those lost to the dot-com fallout by about 80,000 and counting. So, let me ask you: How many of your friends and neighbors have lost their jobs in the last few months? Are the restaurants you eat lunch in and the movie theaters you go to less crowded than they were a year ago because people can no longer afford them? The answers for most of you are likely to be some and a little. Then, if you were around the San Fernando Valley 10 years ago, ask yourself what it was like then. How much trouble were you or your friends in? What was it like to make a payroll in the early 1990s? All of this feels a little bit odd to me. We hear about downturns, business slowdowns, dwindling stock prices, and yet life here seems to go on as if nothing had happened. Face it. By comparison, the Valley today doesn’t have it as bad as other areas, and certainly not as bad as it had it when the aerospace and defense industries collapsed a decade ago. In those days, industry shakeouts meant real jobs right here in the Valley were gone. Thousands of families who had depended for decades on regular paychecks from the giant defense plants they worked at were suddenly in serious trouble. It wasn’t just that restaurants had tables available. The restaurants and the grocery stores and banks and video stores closed down. Add a Northridge earthquake to the mix and the Valley had a lot of catching up to do. Things are different now. Go back to that Power-One example I mentioned earlier. It and many other Valley telecom companies are in trouble for the moment. But those 2,000 layoffs Power-One announced last week? They’re at plants in Mexico and the Dominican Republic that it runs from its headquarters in Camarillo. In a trial by fire all through the 1990s, for the most part the Valley purged itself albeit painfully of those 8-to-5 drive-like-hell-to-get-there-on-time jobs that are being slashed right and left. What’s left at Valley telecom companies, the ones in the trouble, are the engineering staffs, the research and development departments, preparing for the Next Thing. And, if we believe analysts and our own hearts, there is a Next Thing coming. Life, while awful for some of us in the Valley, is not as bad as it is for much of the rest of the country. Somebody, whether intentionally or not, did something right. The Valley’s economy is fairly diversified and many of us more or less had contingency plans. Those manufacturing jobs have been replaced by R & D; teams. The Skunk Works is gone from Burbank and in its place are hundreds of production and postproduction companies using digital technology to make TV shows and movies. Many business owners who’ve been around a while have decided not to stick their hand in the flame twice. For years, they’ve been watching costs, keeping payrolls down and constantly looking for new products and customers. This time most of them were prepared. Elsewhere in this issue you can read of a study conducted by the consulting firm Grant Thornton which tells us that 68 percent of local companies still say attracting and retaining talented employees is very important. Even among Internet companies, the figure is 47 percent. The study tells us that, while companies are cutting manufacturing jobs, those employees who are looking for and designing future products are just too valuable to dump and then find replacements for once business picks up. And that tells us, I think, that business will pick up. Michael Hart is editor of the San Fernando Valley Business Journal. He can be reached at [email protected].

With all the news of layoffs, especially in the tech sector, you might expect to see a 180-degree turnaround in attitudes with respect to staffing. But while it’s true that the hiring frenzy that characterized most of last year has come to an abrupt end, the priority that companies place on keeping their best and brightest continues virtually unabated. Despite the layoffs and outright closures in the tech sector, local companies say that highly skilled, specialized employees are still hard to find, and keeping them remains a front burner issue. “A senior person who can do the job of 10 people is always hard to keep,” said Larry A. Boose, president and CEO of Venturetech Inc., a North Hollywood based software developer. “To get that person you’re going to pay higher dollar and they’re higher maintenance as far as keeping them interested in the projects you’re working on and meeting their needs as far as career goals.” According to a survey of mid-level entrepreneurial companies conducted by accounting and management consulting firm Grant Thornton LLP, most companies, 68 percent, still regard attracting and retaining talented employees among their top concerns, although the percentage was considerably lower among internet companies, 47 percent. The survey, conducted in February, when the tech wreck was in high gear, polled 417 companies representing a variety of businesses including the technology, banking, consumer products and manufacturing sectors. The vast majority of these companies, 85 percent, believe that the leadership skills of owners and managers plays a key role in fostering employee loyalty. Another 73 percent of the survey respondents believe that regular communications from the owner or chief executive of the company is central to keeping employees satisfied. By comparison, 61 percent of the respondents tied compensation packages, including benefits, bonuses and stock options to employee loyalty. Among all the survey respondents, only 42 percent thought that stock option plans had a significant impact on retaining employees. Among those who have stock option plans however, a full 80 percent believe they are effective inducements for retaining employees. “We’re finding that offering stock options is no better incentive than offering cash as a bonus plan,” said Bob Pearlman, a partner at Grant Thornton and leader of the company’s etech practice. Pearlman, whose work is focused in the San Fernando Valley, Conejo Valley, Ventura and Santa Barbara Counties, said he is seeing greater interest, among private companies in those areas, in other kinds of remuneration, including bonus plans pegged to results and goals, and phantom stock plans, where the employee doesn’t actually hold an ownership stake in the company, but rather is given shares that become more valuable as the company value increases. That way, Pearlman says, companies can remain competitive without giving away ownership. Tech companies, however, have traditionally used stock options more than other industry sectors. According to the Grant Thornton survey, 73 percent of internet companies and 61 percent of technology companies offer stock options compared with 41 percent of community banks, 36 percent of consumer and industrial products companies, and 30 percent of all other companies. While tech companies still regard options as an essential component of their human resources strategy, it is not the only one. At Spirent Communications, which employs 384 mostly technical personnel in its Calabasas offices, the president holds breakfast meetings with the staff and workers get regular briefings on the financial performance of the company. But those programs don’t substitute for stock options and competitive pay practices, officials say. “When you say (face time with management) even more than stock options, I don’t buy that,” said Dwight Olson, vice president of operations at Spirent. “We spend a lot of time making sure that we create a culture that is open and conducive to communications upward, downward and sideways. I don’t know that it’s most important, but it’s certainly an important factor.” In general companies have found that the labor shortage of a year ago has eased considerably. Software and internet-related firms like Venturetech report that they are deluged with unsolicited applications daily. “It’s no longer a seller’s market. It’s a buyers market as far as manpower goes,” said Boose. And even those outside of the technology sector are finding it easier to recruit. “We are starting to see a fair amount of candidates for the jobs we hire for, and we’re starting to see a better cut,” said Bob Shaub, director of human resources at Precision Dynamics Corp. But while the layoffs and closures have driven a number of workers out into the labor market they have not guaranteed that employers will find candidates that closely match job requirements, especially where highly technical skills are needed. For one thing, the tech sector layoffs have largely come from the manufacturing side, offering little advantage to those seeking engineering talent. “Truth be told, we haven’t seen much of an easing in the supply of labor,” said Chris Hoogenboom, president and CEO of Internet Machines, a semiconductor company in Agoura Hills. “Companies like Vitesse (Semiconductor Corp.) are laying off manufacturing (workers) because the volume has decreased. So it doesn’t mean that they’ve discontinued research and development.” Even when employers find workers with needed skills, they still must invest considerable time and resources training these workers. As a result, the tech sector downslide has reduced some of the urgency of human resources programs, but not much, these companies say. “For a period of time, we were asking “are we doing enough? What else can we do?” said Olson at Spirent. “We haven’t asked that what else question. But at the same time, we’re still very concerned about it. We have a high degree of engineering resource that has specialized skills, and you can’t retrain people overnight. Once you make an investment in people, you want to keep them.”