Bulbtronics Newsday.com Article

Bulbtronics looking for bright growth with LEDs

by Richard Galant
Source: Newsday.com - Money & Power

January 7, 2008

Imagine installing a lightbulb in your recessed kitchen fixture and not having to replace it until 2025.

Imagine that it uses only a fifth the energy of a standard lightbulb, saving you $29 in electric bills a year, and doesn't contain the mercury that's in a compact fluorescent bulb.

That kind of a revolutionary product is no longer something to imagine. The LED lightbulb exists. Thousands of them powered the Times Square ball that ushered in 2008. LEDs are part of a wave of change that is reshaping the lighting business the way computer technology has reinvented virtually every industry.

With oil hitting $100 a barrel and pressure growing to reduce greenhouse gases, government and industry are pushing for more efficient bulbs.

At Bulbtronics Inc., it's topic A. For the past several years, chief executive Bruce Thaw and his staff have watched as a parade of vendors visited the company's Farmingdale headquarters, trying to show the specialty bulb distributor that their products can replace traditional designs.

Thaw's staff has switched on hundreds of bulbs, scrutinizing the light to see if it is as bright, as warm or cool in color, and as well diffused as the established product.

Filled with circuitry, the newly developed bulbs come in a variety of intricate and bizarre shapes. One looks remarkably like a metal shower head.

But Thaw's team has found that, so far, only a few of the products, powered by light emitting diodes (LEDs), can match the brightness and color of standard white bulbs.

LEDs have a longer track record of successfully producing colored light. Constant innovation is likely to make them better at yielding white light.

Thaw's company actively sells an inventory of about 15,000 products and brings in about $30 million a year in sales. Its bulbs light up Madison Square Garden, Radio City, Broadway shows, Las Vegas casinos, Florida theme parks, hotels, medical devices, assembly lines and cruise ships.

Just finding energy-efficient replacements for all those products is an endlessly complicated venture. At this point it's one that Thaw thinks will be beneficial.

"Any interest in lighting is good for our business," says the 54-year-old executive, who trained as a lawyer and took over the bulb company founded by his mother. The changeover is helping the company ring up double-digit revenue gains, he says.

At the same time, there are risks in such a massive transition. The way Bulbtronics wrestles with it gives you some insight into how businesses are facing challenges in 2008 that are perhaps greater than ever before.

As new bulbs hit the marketplace, they arrive with much higher prices than traditional bulbs. The LED bulb that can replace a traditional 65-watt incandescent bulb used in a recessed "high hat" fixture needs only 12 watts of power. The downside is that such a bulb can cost $110, including the modifications needed to retrofit the fixture, compared to $3 to $5 for the incandescent.

Since it can take years for the savings in energy costs to repay the added price of the bulb, many homeowners won't rush to buy LED bulbs.

The Long Island Power Authority offers incentives to homeowners to use energy-efficient bulbs. Since 1999, it has rebated more than $6 million to the purchasers of more than 4 million bulbs. Rebates this year for compact fluorescents will range from 50 cents to $2.50 depending on the bulb.

Even without rebates, Bulbtronics' customers, nearly all of whom are companies in the entertainment, medical, scientific and other commercial fields, are more likely to invest in high- priced bulbs that will yield savings. They're also likely to leave their lights burning for more hours a day than homeowners, shortening the payback time.

The good news for Thaw is that the LED lightbulb is a high-priced item, with the potential for more profit. The bad news is that the customer may never need to buy another one from Bulbtronics.

"It will change the nature of the lighting business," Thaw says. "An LED has basically an unlimited life. The replacement lightbulb business won't be there."

Thaw thinks his company's expertise in lighting will help customers make the transition, fending off competitors who might undercut his price.

Change is nothing new at Bulbtronics, which got its start in 1976 when Thaw's mother, Frances, was about to lose her job. She was an accounting supervisor at an auto parts distributor that was moving its offices from Melville to Ohio. Frances, who was married and had three children, didn't move with the company. She saw an opportunity in a line of Osram auto lamps that her employer stocked. She bought the inventory and flew to Germany to persuade Osram to let her distribute the line.

Frances Thaw built the company into a major supplier of specialty bulbs and batteries, striking deals to distribute bulbs from a wide range of manufacturers.

Her husband, Allan, helped with advice and seed capital, and Bruce, who graduated from Hofstra Law School, did the legal work to incorporate the company and helped it expand by opening its offices in California.

Frances Thaw won recognition for running the largest Long Island company owned by a woman and received several entrepreneurial awards. Eight years ago, she died of lung cancer at age 67. "She really loved the business and wanted it to prosper," Bruce Thaw says. "She did ask me to keep it going."

It wasn't a hard sell. "I always had a love for the business," says Thaw, who stopped practicing law so he could devote himself to running the company.

Taking over as chief executive, Thaw was concerned that greater foreign competition and the ease of comparison shopping on the Internet was threatening the company's sales and profit margin. Rather than pull back, he says, he decided to invest millions in upgrading Bulbtronics.

Thaw expanded the warehouse by 50 percent, enhanced the company's Web site and computer systems, added sales channels and opened offices in Orlando, Fla., to serve the theme-park industry and in Miami to gain business in South America and south Florida.

He hopes to decide this year whether to build another warehouse at the company's Farmingdale site that would more than double its storage capacity.

Thaw says the turbulence in the economy doesn't shake his confidence. Bulbtronics serves many industries, including health-care-related fields that tend to hold up well in tough times. In fact, he sees this as a good time to grow. "We are constantly looking for an appropriate acquisition," he says. "I am not considering selling the company. It's too much fun."

Five years from now, Thaw's company might be one with an entirely different look. And by then, with the spread of long-life bulbs, the answer to the classic question, "How many people does it take to replace a lightbulb," might be, "Why would you want to do that?"