Investment evidence
the Marketing/Engineering Investment Ratio™ (M/E Ratio™)

"Your evidence of the relationship between Market Research and success is right on!  Dell's M/E Ratio™ is North of 1.5."  Michael S. Dell, Founder, Chairman, and CEO of Dell Computer Corporation

Contents

The hook
Introduction
The evidence
Definitions
Marketing/Engineering Investment Ratio™ (M/E Ratio™)
Super Successes data
Flaming Failure data
A wakeup call to get started
Figures
Print out the Evidence - PDF, 1 page, 0.1 MB

Lost $1 Billion in market capitalization during 1997, 99.2% of the value, the biggest loser in Bloomberg's yearly Massachusetts index.  Filed for Chapter 11 bankruptcy on December 3, 1997 and delisted by Nasdaq on February 10, 1998.  Assets sold for $10.5 million on November 25, 1998 while its market capitalization plunges from $1 Billion to $2.13 million.

Molten Metal is a case of a company being a success at one time in their history (with a high M/E Ratio™), and being a failure at another time (with a low M/E Ratio™).  Other similar cases in this research include Varian Associates with certain products, and a Becton Dickinson division which passed through several owners.

President Jim Engel explains, "Optra is a failure.  We got what we deserved.  We should have spent more money on marketing!"

Keithley Instruments acquired Data Acquisition Systems (DAS) for $1.05 million in 1984, acquired Asyst Software for $9.1 million in 1987, and folded both into MetraByte of Taunton, Massachusetts which was acquired for $23.4 million in 1989.  Keithley closed the combined ($33.55 million acquisition price) operation in 1996.

"Before I started MRS twelve years ago, I worked at one of the major failures cited in your research, GCA.  At the time, I didn't see the low ratio of marketing to R&D as a risk, so I incorporated the same weakness into MRS's structure.  Recently, I saw the lack of detailed market research and careful product positioning as real weaknesses.

"Your article, 'An Approach for Semiconductor Equipment Firms,' precipitated a major change at MRS Technology.  I tore your story out of Channel Magazine and passed it out to my management team and to our Board of Directors.  I hired a new Product Manager immediately.  MRS will now drive towards the 1:1 Marketing/Engineering Investment Ratio™ that you champion."  Griffith (Griff) L. Resor, founder, President, and CEO of MRS Technology In Chelmsford, MA.

It was too late and too little; MRS declared bankruptcy on July 1, 1998.

Former CFO Robert Kern recounts, "Hampshire's M/E Ratio™ was 0.05 from 1984 - 1990.  In 1991 and 1992, our President Moshe Lubin tried desperately to find out what customers really wanted, doubling the M/E Ratio™ to 0.1.  It wasn't enough!  They closed the doors in 1993."

Moshe Lubin committed suicide.

StarGen squandered $56 million in Venture Capital.  After seven years, they barely rose to $5 Million revenue and needed $20 million more to burn for the next two years until they maybe broke even.

The VCs gave up and began shutting the doors in August, 2006.

In the early 2000s, as Cytyc's market capitalization was soaring to $3.65 Billion, Orchid BioSciences'  market capitalization was plummeting from $3.3 Billion to $19 million.

Veeco had already invested $.3 million when primary market research discovered that customers were going in a different direction.  Abandoned.  Read how Veeco saved $1,000,000 with market research.

Chairman of the Board Joe Keithley declared his Cleveland, Ohio company a failure in its 1992 annual report, "Our introduction of new products . . . has not produced growth . . . and we are not pleased."

Former GCA executive Bill Tobey observed, "Absolute arrogance on the part of our technical people, especially engineering.  They thought that no one could possibly equal their engineering feats.  We just blew it!"

Varian's group leader committed suicide.

http://www.cpii.com/bmd - Communications and Power Industries (CPII) is the successor company to the Electron Device Business of Varian Associates.

Once 21,400 employees including 5,350 technologists, Polaroid was an, "American business icon of another day, charter member of the 1970s Nifty Fifty stock market phenomenon ..."  Business lessons from the abyss, Boston Globe June 17, 2001

This startup struggled mightily, spending somewhere between $40 and $50 million total over five years, including $2 million per year on promoting and selling, yet only achieved $500 K per year in sales.

A new CEO, Mr. Richard Langevin, raised their M/E Ratio™ to 1.1 in 1997 whereupon sales took off like a rocket from $.5 million per year to #14 million per year.

Incredibly, Evidian USA dropped the M/E Ratio™ back down to 0.03 in 2000 after Mr. Langevin was promoted elsewhere in their parent company.  Sales ceased.  Literally, Evidian never made another sale.  After they had shipped all the units on backlog, revenues ceased.  They shut the doors in 2002 after three years of no sales and no revenue.

Read "Market Research Drives Revenue"

While losing more than $1/2 Trillion in market value, the CEO was clueless.

"I was surprised to go from a 70% annual growth rate in one quarter, to zero growth in the next quarter, and to be facing a drop in the coming quarter."  John Chambers, President and Chief Executive Officer, CEO Exchange  September, 2001 by the Public Broadcasting System (PBS) 
http://www.pbs.org/wttw/ceoexchange/episode_205/index.html

Excuse me, but where was your Marketing department to tell you what was happening in the market?  How come you were surprised?  It seems that a multi-Billion dollar company could readily afford to have a competent Marketing organization and, furthermore, that Billions of dollars were at stake.

"Cisco ... clearly misread the market ... because they weren't analyzing their customers' businesses."  Management Lessons from the Bust, Business Week Magazine August 27, 2001

Years ahead of Microsoft, their heavy engineering investments lead to a preemptive multitasking, windowed user interface (DESQview), to a memory manager (QEMM), to an Internet browser, to Web authoring tools, and to other industry firsts.

"We don't invest in market research.  We invest in technology," said Gary Ulaner, Director of Product Management.  Quarterdeck lost nearly $1 Billion in market capitalization from 1995 to 1998, and was acquired for $65 million by Symantec in November, 1998.

"Facing shutdown ... fighting to keep the lights on."
Boston Globe, January 1, 2010

Invested $1 million (2010 $) with 5 U.S. patents granted and 15 pending, only to discover that they had developed a technology for which there was no need.  Abandoned.

"Without Marketing guidance, more than 70% of Xerox' $8+ Billion technology investment was wasted!"  Nancy K.M. Rees, Director, Corporate Engineering

Pioneered office PC software with the purchase of VisiCalc and with the development of Lotus 1-2-3.  Lost dominate position to Microsoft.   

  prior

next, A Wakeup call to get started 

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The hook
Introduction
The evidence
Definitions
Marketing/Engineering Investment Ratio™ (M/E Ratio™)
Super Successes data
Flaming Failure data
A wakeup call to get started
Figures
Print out the Evidence - PDF, 1 page, 0.1 MB