The world is going flat

As cathode-ray tube monitors give way to slim screens, Beaverton firm booms

Looking for a ray of hope in the gloom of Oregon's technology sector?

Think thin.

Those sleek flat-panel computer monitors that once decorated only the most opulent of corporate settings are beginning to show up almost everywhere.

Flat-panel displays, or FPDs, are rapidly making their boxy CRT (cathode-ray tube) brethren obsolete. Even if people aren't buying many computers these days, they do seem to be shedding CRTs for FPDs.

By the middle of next year, total FPD shipments are expected to pass up CRT sales for the first time, according to industry forecasts ÑÊand, by 2006, to leave CRTs in the dust, outselling them 5-to-1.

Riding the crest of the wave is Beaverton-based Planar Systems Inc., a world leader in the design and production of FPDs.

Planar's desktop monitor sales rose 277 percent last year, a $40 million increase; overall, the company grossed $206 million. And company executives expect a banner year this year.

After a shaky start, the company seems to be making good on the forecast. Its revenues in the second quarter, which just ended, hit a record $60 million. Its stock, idling in the $10 range earlier this year, vaulted into its current $17 range, although it's still below a 52-week high of $25.

Planar's success hinges on its edge in liquid crystal displays, or LCDs, a technology used in everything from home computers to medical diagnostic equipment, and on its diverse product line. It markets to the industrial, medical and commercial markets in nearly equal proportions.

'I think they're in a good business: Flat-panel displays is a secular growth area for our economy,' said Hugh Evans, vice president of Baltimore-based T. Rowe Price, which holds nearly 5 percent of Planar's outstanding shares in its various mutual fund portfolios.

Planar is succeeding ÑÊbut on its own terms.

It has a refreshingly earnest 'do-the-right-thing' corporate culture that is winning attention on Wall Street.

Its rave notices recently have come largely from the manner by which Balaji Krishnamurthy, Planar's chairman, president and chief executive officer, and other top company executives are compensated.

Krishnamurthy and the company's top executives, for example, are the last to collect performance-based bonuses under a system that he and other executives devised just after he joined Planar in October 1999. Rank-and-file workers get their quarterly and annual bonuses first, followed by Planar's middle managers.

'We'd envisioned this before the bubble burst and before all of the corporate scandals unfolded,' Krishnamurthy said.

But Planar's system stands in sharp contrast to many other companies ÑÊAmerican Airlines being the most recent example ÑÊwhere top executives are first at the trough no matter how poor their performance, even as pay cuts are being forced on the rank and file.

Planar's system has 'generated some attention and made some investors want to learn about the company,' said Stewart Clark, director of investor relations at Planar. 'Clearly, people are impressed by it.'

The Wall Street Journal, in an April 14 article, even cited the company as an exemplar of corporate accountability.

The rationale for Planar's system isn't exactly altruism; it's seen as good management. The idea, as Krishnamurthy explained it, was to give lower-level managers an incentive.

'We wanted (them) to have skin in the game. We É wanted to ensure they could help us deliver the performance we wanted,' said Krishnamurthy, who came to Planar after stints at Tektronix Inc. and General Electric Co.

'There's a reason why people work Ñ 99 percent of it is to make money,' he said.

Besides, the system isn't driving Krishnamurthy to the poorhouse. His salary and exercised options last year yielded him a total of $549,000, although that was far less than the $1.1 million he took home in 2001.

Another of Planar's charms is its growing prowess in the medical display industry, aided by its acquisition a year ago of Dome Imaging Systems Inc. of Waltham, Mass., a maker of graphic imaging boards, FPDs and software.

Medical displays offer a

recession-proof market, company executives believe.

'People don't get sick more or sick less just because there's bad economic times,' Krishnamurthy said.

Moreover, there is a large-scale transition under way to diagnostic equipment that produce digitized images on flat-panel LCDs. Monitors used in mammographies, ultrasound examinations and CAT scans represent one of Planar's biggest niches.

Krishnamurthy also has big ambitions for Planar's commercial division, which is targeting businesses Ñ not to mention the homes of the well-heeled Ñ for those massive (42- to 60-inch) plasma monitors that can be hung like paintings on a wall.

Whether that business segment fattens Planar's bottom line remains to be seen. But Planar's growth doesn't necessarily translate into jobs for Oregonians.

The company's recent move to use overseas manufacturers means that 30 employees at its Hillsboro plant will lose their jobs when the plant closes this summer. Planar will consolidate the production into a Finnish plant; it also contracts with manufacturers in China, Indonesia, Korea, Singapore and Taiwan.

'We required some unique skills and competencies,' Krishnamurthy explained. 'It's tough to close this plant because of its spiritual sense: It's what the company was founded on 20 years ago.'