CASE STUDY -BUILDING COMPUDYNE

The global security firm CompuDyne is one of the biggest and most successful security companies in the world, which produces prison equipment and surveillance gear and it helps protect government buildings against terrorism. After the 1998 bombings of two U.S. embassies in Africa, CompuDyne's business supplying blast-resistant windows and doors to most of the embassies around the world doubled. After the terrorist attack on the U.S.S. Cole in 2000, the company was hired to provide shoreline protection for the U.S. Navy and Air Force. And following the attacks on the World Trade Center and the Pentagon on September 11, 2001, CompuDyne started fielding calls from federal and state government agencies around the country asking for help in protecting "at-risk assets" like nuclear power plants.

Security companies are doing very well right now, but CompuDyne is doing better than most. It has posted consistent growth over the last five years. Considered the industry leader in the market for physical and electronic security, the company took in $141 million in revenues in 2005, compared to $127 million in revenues in 2001. That performance becomes even more impressive when you consider that the company was near bankruptcy in 1995. CompuDyne was founded as a defense contractor back in the early 1950s. For decades, it stuck mostly to security projects, but in the 1980s, when big conglomerates like Gulf & Western were popular, the company's management made an ill-fated attempt to branch off into new businesses. Some of the choices weren't entirely inane, like a home-improvement division, but others were, billboards and plastic extrusion. The diversification strategy turned out to be a disaster. By 1995, the loss of focus

had combined with some management missteps had driven revenues down to just $12 million, and book value was literally zero.

In large part, the credit for CompuDyne's resurgence goes to Marty Roenigk. A former investment executive at Travelers, he took over the company that year, streamlined its operations, made a series of strategic acquisitions, and encouraged the discovery of new technologies that could fight new threats. Some of the company's recent success is undoubtedly due to being in the right business at the right time, but the better part goes to Roenigk's ability to figure out a simple strategy and execute it extremely well.

Roenigk owned a private manufacturer called MicroAssembly Systems, which made tiny screws originally used to assemble cameras. Roenigk had built the company to about $1.6 million in revenues and had deals with AT&T and Hewlett-Packard when a stockbroker told him about CompuDyne. Roenigk saw an opportunity to fold his small

company into something much bigger. MicroAssembly had a core strategy and a good balance sheet, while CompuDyne was an ugly collection of assets that didn't belong together. In a reverse mergera deal in which a bigger company buys a smaller one but the smaller company retains controlRoenigk took over. He immediately got rid of the management team and sold off everything not related to security (including his old company.)

After he sold off all the unrelated pieces, Roenigk started shopping for new ones that would fit better. CompuDyne's first purchase was a firm that sold electronic security systems for prisons. Roenigk also wanted to buy Norment Industries, a company that made bullet- and blast-resistant products as well as prison locks and doors. He spent about two years lobbying for the deal, finally closing it in late 1998. After each deal, Roenigk was smart enough to leave the new divisions mostly intact.

With lingering terrorism fears, CompuDyne enjoyed a surging demand for its security products. In January 2004 the firm secured Army and Navy orders for security bollards and pop-up barriers that sent its stock up 14%. But the company's financial position has recently deteriorated. CompuDyne reported a "sharp curtailment" of prison and jail construction contracts. For 2005 the company reported a loss of $8.2 million.

Although most of its business is still in the nuts and bolts of security, such as blast-proof doors and pop-up barriers, the company has continued to bolster its work in security software. It recently acquired 90 Degrees and its emergency medical information software for public safety agencies.

With employees working remotely during the COVID-19 pandemic, companies were struggling to keep their IT networks safe. John Marinac, president and CTO of Compudyne, said they "have seen a real rash of security incidents as fallout from a migrating workforce". When employees use their own home computers for work, it opens up more vulnerabilities. This increase in remote work, lead to a greater burden to keep company data safe. The most common scam is sending emails containing links to unleash malware. Compudyne is now offering a solution to combat email phishing attacks by offering customers SAT - which stands for "security awareness training" and it focuses on end-user education.

QUESTIONS-

1. What does this case teach you about finding opportunities for forming your own business?

2. Is being at the right place at the right time an accident, or are some people cleverer than others at being in the right place at the right time?

3. What does this case teach you about making the most of a bad thing?