One Way To Print Money

David A. Purcell, chief executive of Encad Inc., a maker of large color printers, knows better than to take his company's explosive growth for granted. "We became an overnight success," he says, "after a decade of failures."

Purcell, 58, started the San Diego-based Encad in 1981 to make pen plotters, machines that create large line drawings for engineering and manufacturing companies. Although it was the die-hard entrepreneur's fourth business--he had started and sold off three electronics companies in the previous 12 years--the early going was rough. "We were too small and too busy fighting Hewlett-Packard and [Lockheed Martin's] CalComp," Purcell says.

In 1991, Encad's fortunes changed when it introduced the first wide-format color inkjet printer. It did the same job as pen plotters, only 10 times faster. The company's three-to-four-foot-wide printers--which sell for $4,000 to $20,000--revolutionized the industry and helped Encad stop printing red ink. Today, Encad ranks No.35 on BUSINESS WEEK's Hot Growth list. In 1995, the company's earnings rose 31%, to $7.86 million, on a revenue gain of 50%, to $65.5 million, from 1994. Analyst Stephen Fleming of Robertson, Stephens & Co. thinks 1996 earnings will rise an additional 25%, to $9.7 million.

To do that, Encad will have to fend off some weighty rivals. Hewlett-Packard, which dominates the computer-automated-design (CAD) arena, now makes a similar printer. But Encad has 60% to 70% of the graphic arts market, which Marco Boer, a partner at Hanover (Mass.)-based market researcher IT Strategies Inc., thinks will be worth around $320 million by 1998. Customers include graphic arts service bureaus and photo labs, as well as companies such as retailer Nordstrom Inc., which used an Encad printer to create "tapestries" for a San Francisco Opera Guild benefit.

With his lengthy track record, Purcell has also learned a thing or two about keeping a step ahead. So in addition to printers, he has started supplying the ink and paper that goes in them, a market 10 times as large. For its new NovaJet printers, Encad turned to Lexmark International Group Inc. for a proprietary cartridge. Encad will also offer coated papers, films, and a printable canvas.

To broaden distribution, Encad also cut a deal with Xerox Corp. to manufacture a version of its printer under the Xerox brand. Xerox' large direct-sales force should help Encad tap the market for corporations that already work with Xerox and want to print their own graphics.

And this summer, Encad will start shipping the first inkjet printing system to use outdoor inks durable enough to weather the elements without fading. That should open up a huge market for everything from billboards to bus placards. "It's an incredible coup for Encad," says Boer. Indeed, it's an opportunity as vast as the great outdoors.

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