FIVE YEARS AGO, the economy was not very strong. The US was still trying to recover from the stock-market dip after September 11, 2001. Consumer confidence was down. In fact, the situation was somewhat similar to where the economy is todayexcept that the current economy is in even worse shape because of the housing-bubble burst. Tough economic times do not have to translate into a lack of opportunity, however. In 2003, a company called RFMW was just being spawned. The distributor, which specializes in providing RF and microwave components and component-engineering support, was profitable from the first day of its second year. This achievement can be credited to the fact that RFMW stuck to its business plan, which did not allow for a long period of losses, and never spent money that it did not have. The firm's success also can be credited to its business philosophy: "Given the right environment, there is no limit to what our team can accomplish." Here, we talk to Joel Levine, the company's President, about how they make RFMW an enjoyable place to work and where he sees the company going.
MWRF: Your company started in 2003, correct?
JL: We were basically born at MTT in Philly in 2003. There, we got commitments fromI will use a round number of 10 major suppliersthat if we started RFMW, they would franchise us. And we would be able to sell their products as a franchised distributor.
MWRF: So that is when you decided that you had a good idea and you should go ahead with it?
JL: We were pretty much ready to go and that was just the confirmation that we were on the right track. Our target date was July 1, 2003 to start and as long as we had all of those confirmations, we were ready to go.
MWRF: What were you doing before you began RFMW?
JL: In 1979, I started what is today the RF and microwave group of Richardson Electronics. That was started originally as a company called RF Gain. That developed into me running the RF and microwave division of Richardson for about 18 years. In 1997, I had an offer that I could not refuse from Penstock. It was a great opportunity to learn from Bruce White and Jerry Quinnell, who pretty much started RF and microwave specialization as far as distribution. I moved to California that year. Then Penstock became fully part of Avnet and was Avnet RF at one point. That lasted until about April 1, 2003 before we left to start RFMW. Avnet had decided that they did not see the need for RF specialization while we felt the industry still needed it. That is why we started RFMW.
MWRF: Who helped you to start up RFMW?
JL: The original founders were myself, Steve Takaki (my partner), a guy who is no longer with us named Mike Lee, and JoAnn Atangan. And all these people are ex-Penstock, ex-Avnet-RF people. We also teamed up with another company called Component Distributors or CDI, which provided infrastructure for usespecially at the very beginning. The key to our success was the suppliers that came with us from the beginning or almost right from the beginning, which were Skyworks, M/A-COM, what was then Sirenza (now RFMD), and eventually TriQuint.
MWRF: Who is currently an active part of the RFMW team?
JL: We have 40 employees mostly in North America. We have opened an Israeli office and we have one person in Europe who is exploring our European strategy and business development. We have salespeople all over North America and our headquarters is in San Jose, CA, which we have just expanded. We have gone from 1000 square feet when we started to around 9000 square feet today. We also have gone from basically just a small office and warehouse to a nicer facility complete with a cleanroom and some value-added capabilities.
MWRF: Who is at the top running the show besides yourself?
JL: Steve Takaki is our Vice President of Sales and Marketing. JoAnn is still with us. Despite her young age, we consider her the company matriarch. She acts as Treasurer and handles financial operations. One other guy has been with us pretty much from the beginningJohn Hamilton, who is Director of Marketing. And all our people are RF and microwave experienced. There are even people who, like me, have 30-plus years of experience; it is hard to say that! Even a young one like JoAnn has over 10 years of experience in RF and microwave.
MWRF: Between all of you "folks at the top," so to speak, what kind of company environment do you try to create?
JL: We have our Ten Commandments. When we were at Penstock, we had the "Five Points of Light." The keys to the Five Points of Light were: technical aptitude in the sales organization, best suppliers on the line card, strategically profiled inventory, focusing on an RF and microwave-focused customer base and market, and having value-added services. So those were pretty much, although I might be paraphrasing, the Five Points of Light from the Penstock days. Then we read this book, "It's Not The Big That Eat The Small, It's The Fast That Eat The Slow" and we added five more:
Create a culture and a team that provides an ease of doing business that is unequaled in the industry. So it is basically customer-service-oriented.
To move fast, to be able to make decisions quicklyand not be bogged down by bureaucracy.
To be profitable.
To have fun and enjoy ourselves.
To create and control our own destiny so we can execute the strategy and the vision that we believe in and that we think will create shareholder value because we do have investors.
Those are the basic 10 things that we live by. If you look at it from the perspective of day to day, we try to hire, develop, and employ the best peoplelike I said before, operational excellence as far as quality service and ease of doing business. Also, concerning the lack of bureaucracy, we try to execute a simple and consistent strategy. We have been in companies where the strategy changes every six months.
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MWRF: Right, and then you have to have a lot of meetings all the time to tell everyone what the new strategy is.
JL: Yes. We know exactly what we want to do and where we want to go. What we have been learning has been the mini-MBA that we have all been going through in the last five yearsespecially regarding financial management. That goes back to profit but it also is teaching everybody within the company. Employee development is key. Besides working on the technical aspects, we are constantly emphasizing the commercial aspects of the company as far as cash flow, end profitability, and return on investment, which includes inventory management and everything around the AP and the AR.
MWRF: You are busy, successful, and you are keeping everyone moving all the time. So it sounds like the hardest part of that equation would be to have fun.
JL: First of all, I am kind of the anti-manager. We continually tell jokes and goof on each other. We have no real issues about people playing music. In the San Jose group, we go out to lunch together whenever possible. We get together once or twice a year as a company. While we focus on trainingwhether it be the technical training, sales training, or financial issueswe always set aside a day or so and have activities and team-building events. We have worked for big companies where that fell by the waysideespecially during the downturns. If we are not enjoying ourselves, I do not want to be in this business. We are trying to make it more of an employee-owned business and an employee-driven business, so we set the culture and the tone of the business that way also.
MWRF: I think you realized something significant because the thing you hear again and again in this industry is that there are so many good people in it. That is why everyone looks forward to MTT-S every year.
JL: Well, the people we hire have to share the vision of where we are going. If they do not share the vision of where we are going, we are not going to hire them. You mention MTT. We had our fifth-year birthday party at MTT. We invited a bunch of people and had over 100-plus attend our event. We had to be careful what we did budget-wise, but we also wanted to invite everyone we wanted to acknowledge. That was a lot of people because we have had tremendous support from the industry from the people who realize what we are trying to accomplish and how focused we are in RF and microwave. It was funny because I got up in front of everyone and said, "Where else could you find RFMD, Skyworks, M/A-COM, and TriQuint all under one roof, all laughing and hanging out together?" We had a great time.
MWRF: I can tell you folks still have a lot of energy about how you are doing things and what your vision is. Do you still think of yourselves as a startup or do you look at your customers and say, "They have been working with us for five years, so obviously we are now a stable, established company?" Or is it a mix of both?
JL: It depends on who we are providing to, actually. We still feel like a startup. We have no real "suits" working for us, if you will. I come in in jeans and a t-shirt every day and I could do anything. I know what I have to do. But at any given moment, I could be in the warehouse, checking something under a microscope, or helping to pull or ship an order or something like that. So we are still acting like a startup. Everybody understands where we are in our gestation period. We have a lot ahead of us. We have grown rather quickly and I owe it to the people we have working here and to our suppliersand the customers also.
MWRF: I noticed that you are working with Rosenberger. How did you come to work with them, as the other companies are all US-based?
JL: When we started, we really wanted top-of-the-line products. Our strategy was that we did not need to and did not want to compete with the broadline distributors on commodity-type connectors or something that everybody has. And Rosenberger is known as one of theI do not know, Lexuses, Cadillacs, or Mercedes, take your pickof the industry in terms of the highest-quality connectors. That is one of the things that we definitely bring to the party from our people. We had a lot of relationships and one of the relationships was with somebody who worked for Rosenberger and reps for Rosenberger. We got to talking and we saw a benefit to both parties and we joined up with them almost from the beginning. We have given them some extra exposure in the marketplace and they have done well by us also. They have a facility in Pennsylvania, but they have a fantastic facility in Germany. Their production facility is unbelievable. And the Rosenberger family are just wonderful people.
MWRF: Do you have plans to expand into other product areas?
JL: As long as it is RF and microwave-oriented, yes. We may help other people. We have pointed other people in the direction of adding product lines like our sister company, Component Distributors. But if it is not RF and microwave, we are not interested.
MWRF: Do you have any advice for folks looking to start up in the microwave industry?
JL: In any business, you better know what you are doing and you better love what you are doing. Those are two things that I think made us successful given what we have learned over the last five years. There is no way we could have done it or would have done it without those two things.
MWRF: RFMW did not start out at a great time considering the general economy at the time.
JL: Our attitude toward that was that there was no place to go but up. And at that point, money was not necessarily that available but it was "cheaper." That helped us a bit. We are component distributors, but our biggest investor at the time and our largest partner helped us. But we pretty much financed this whole thing mostly from friends and family. At the time, that worked for us.
MWRF: I take it your plan for the current economic times is to forge ahead?
JL: Yes. We are being cautiousto use an overused expression, cautiously optimistic. We are not going to fool ourselves as far as expenses. We are watching our expenses, watching our inventory, watching what our customer base is doing. Overall, the best way to say it is that if you take into consideration expenses, inventory, and credit, we are just managing our risk overall. We are watching it very carefully and we are not going to overextend ourselves. We are looking to expand internationally. We are making specific movesnot doing things just to do them. Everybody says we have to be global or international, but we want to make sure that we are in the right place at the right time and can be profitable.
MWRF: Your first international effort is Israel, you said. How did you pick that?
JL: Two or three things came together at the same time. The right people were available and a couple of product lines were available. We made a carefully considered decision and we hit it off. We started RFMW Israel a year and a quarter ago and we have been watching it grow. It is just a matter of timing and again, the right people. We also looked at Asia and Europe. My attitude is that China is a big place. Just like somebody coming over from Asia or Europe and looking at North America, you cannot put one person in New York City, Washington, DC, or LA. You need to know what the plan is to cover a country. Otherwise, you are not going to get much credibility and you are not going to get much done. Probably within the next few months, we will make some moves in some international territories.