Milwaukee Journal Sentinel
May 1, 2000.
Local company Xymox is pushing all the right buttons
expects more growth in competitive world of membrane switches

By Rose J. Wesolek
of the Journal Sentinel staff
Last Updated: April 30, 2000

They tell the microwave to cook on high for 30 seconds, recognize what grade of gasoline to dispense at the pump, and inform the treadmill at the gym how long you want to work out.
Many of the devices that interpret person-to-machine contact, known as membrane switches, trace their origins to a Milwaukee technology company whose sales have more than tripled in the past four years.
Xymox Technologies Inc., which was spun out of W.H. Brady Co. in 1993, is one of the fastest-growing companies in its industry and has expanded its operations into three states and two countries.
"Almost everyone in the United States touches our buttons ," said Pete Sognefest, president and chief executive officer of Xymox Technologies Inc. since 1996. "We make 95% of the buttons used on gasoline dispensers, have the No. 1 hospital bed for childbirth in the country and supply GTE airline telephones with their push-button technology.
"We are all around you."
The North American leader in the industry, Xymox provides custom-designed and stock membrane switches and modules for some 600 companies worldwide, including GTE, Lucent Technologies, AT&T, Panasonic, Xerox, Motorola and most major gasoline pump companies.
Xymox's membrane switches can be found in almost any product utilizing push-button technology, such as household appliances, cellular phones, gasoline pumps, medical equipment, tread mills and copy machines.
Since 1996, when the current management team took over, this privately held company has grown from a $12.8 million business with one facility in Milwaukee to a company with $38 million in annual sales. It has manufacturing plants in Ho Chi Minh City, Vietnam, and Tijuana, Mexico, with subsidiaries and manufacturing facilities in Sunnyvale, Calif., and Millville, N.J.
Bob Heidenrich, the director of sales and marketing at Xymox, said that the membrane switches and the graphic overlays designed by Xymox must function correctly and be aesthetically pleasing.
"When someone decides which microwave or washing machine to purchase, many times they decide based on the design of our graphics and membrane switches," Heidenrich said. "Our piece isn't the expensive piece; it's the visual piece. It is very important for our customers for it to be attractive and easy to use."
Medical device manufacturer Medtronic Physio-Control of Redmond, Wash., chose Xymox as a business partner after surveying 14 different membrane switch manufacturers. Although quick visual recognition is important for medical equipment, the quality of Xymox's products was the main reason for the decision.
Jeanne Carr, the commodity manager at Medtronic, said the complexity of their products, such as defibrillators, required the precise technology, strong engineering and large breadth of knowledge that only Xymox offered.
"Our products march to a different drum than others," Carr said. "If a computer has a glitch, you may need to replace the keyboard or get a new hard drive. But if a defibrillator has a glitch, that could cost a life."
Carr said that Medtronic was also impressed with Xymox's willingness to work with their engineers to design a custom membrane switch for their product.
"When our customer presses that button, it better work," she said. "With Xymox under our keyboard we know it will. They have proven numerous times that they have the technical ability, quality and customer services to meet our standards."
In the last two years, Xymox dramatically expanded its operations through acquisitions and currently holds 8% of the $500 million membrane switch market in the United States.
This makes Xymox the largest player in a very fragmented market, said Sognefest, who added that some companies such as Molex Inc. and ARK-LES have about $15 to $20 million in annual sales, but the membrane switch division is only a part of the larger company.
"We are about twice the size of anybody we know of," he said.
John Nering, a spokesman for www.Membrane-switches.com, a Web site devoted to studying the industry, said there are about 150 companies in the U.S. that cite membrane switches as their primary product, with 38 in the Midwest U.S.
"Most of these manufacturers are small and regional and range in size from about $3 million to $5 million in annual sales," Nering said.
Considering that his company has $38 million in annual revenue, Sognefest said Xymox is "a little company, but a giant in our industry."
Sognefest said the company has grown through technological advances and acquisitions. In April 1998, Xymox acquired Paneltec Inc., of Santa Clara, Calif., which manufactures similar products and added the Vietnam facility to Xymox.
Millville, N.J.-based Silver Cloud Manufacturing Co. was bought in February 1999. Silver Cloud had 1998 revenue of about $12 million and specialized in developing lenses used in electronic equipment.
Xymox purchased the encapsulated liquid-crystal display operation of Raychem Corp. in April of last year. The Sunnyvale, Calif.-based business had annual revenue of about $4 million. This acquisition added NCAP Displays, a high performance color display and membrane switch, to Xymox's product line.
"If you acquire more companies in a certain industry, you are able to get better prices, pool resources and establish yourself as a leader in the industry," Sognefest said. "The main goals of Xymox are to achieve leadership in market share, technology, quality and customer service."
Besides growing through its acquisitions, Xymox is enlarging its customer base and staying ahead of the competition by offering the latest technology and innovations to its clients.
Last November, Xymox entered into a licensing agreement with DuraSwitch Industries Inc., of Phoenix, Ariz. Xymox became the first company to manufacture and market DuraSwitch's new PushGate push button switch.
According to Tim Kuhn, vice president of business development for DuraSwitch, PushGate technology allows for a more durable product and enhances proven applications.
"Xymox is a fantastic company and a very respected player in the industry," Kuhn said. "This alliance is very beneficial for both of us. Xymox has set themselves apart from the competition with their unique product line and international manufacturing facilities."
Said Sognefest: "Strategic alliances, such as the DuraSwitch agreement, gives Xymox a unique patented technology. This enables us to broaden our product offering and maintain a competitive advantage."
As far as the future of the agreement, both companies see its potential.
"We see this relationship growing in the future," Kuhn said. "As we come out with new products, we will look to Xymox to manufacture and market them."
Xymox traces its roots to Milwaukee-based Brady Co., which in 1993 sold its 14-year-old membrane switch division, now Xymox Technologies, to better focus on its core business. Horizon Partners Ltd., a Milwaukee-based investment company, was the purchaser.
Paul Stewart, a principal at Horizon, said the decision to purchase Brady's Xymox division was based on the company's high standing in the market, its excellent name recognition and the opportunity to continue to grow the company.
"I'm biased when it comes to Pete (Sognefest) and Xymox," said Stewart, who is also on the company's board of directors. "It's worked out extremely well. It's the way I wish every deal would work out."
Xymox's success has not gone unnoticed. In 1999, Arthur Andersen consulting recognized Xymox among 12 firms on its annual Fast Track Wisconsin list, which recognizes fast-growing privately held companies.
Looking ahead, Jeff Cohen, the chief financial officer at Xymox, predicts that Xymox's fiscal 2001 sales will be about $45 million or $50 million and that the company will continue to develop as a global leader in membrane switch technology and production.
Recently, Xymox won more than $7.8 million in contracts from a U.S. cellular phone manufacturer, Korean and U.S. appliance companies and a major U.S. gasoline pump company.
"The outlook for Xymox is extremely bright," Horizon's Stewart said. "The approach to the market in North America has been extremely successful. Xymox has the opportunity to continue to grow into the Europe and Asia markets."

Appeared in the Milwaukee Journal Sentinel on May 1, 2000.
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