Zero Corporation

500 West 200 North
North Salt Lake, Utah 84054
U.S.A.
Telephone: (801) 298-5900
Toll Free: (800) 500-ZERO
Fax: (801) 299-7389
Web site: http://www.zerocorp.com

Private Company
Incorporated: 1952 as Zierold Sheet Metal Co.
Employees: 300
Sales: $25 million (2005 est.)
NAIC: 326199 All Other Plastics Product Manufacturing; 331315 Aluminum Sheet, Plate, and Foil Manufacturing; 331316 Aluminum Extruded Product Manufacturing; 332431 Metal Can Manufacturing; 335999 All Other Miscellaneous Electrical Equipment and Component Manu- facturing

Zero Corporation is a leading designer and manufacturer of enclosure, cooling, and other systems, primarily for the electronics industry. Zero products include electronic cabinets, card cages, backplanes, power supply, and such thermal management systems as closed-loop air conditioning systems and motorized impellers. Key markets include the aerospace, defense, medical, and automotive industries. Zero once owned Zero Halliburton, the famous luggage brand, but sold this with the company’s consumer division to Japan’s ACE Co. Ltd. in 2007.

SCRAP METAL ORIGINS

German immigrant Herman Zierold founded a small sheet metal business in Los Angeles in the early part of the 20th century. By the end of World War II, Zierold’s company had annual sales of about $300,000 and ten employees; Zierold himself delivered its precision aluminum and sheet metal products. In 1951, Zierold sold his business to Jack Gilbert, who renamed the company Zierold Manufacturing Co. Gilbert had dropped out of high school after his father died during the Great Depression. Working a variety of jobs, including a stint with Douglas Aircraft during World War II, Gilbert decided to go into business for himself. Gilbert’s interest was in the nascent electronics industry and the need for precision sheet metal products. “I looked at 30 or 35 companies,” Gilbert told Forbes, “until I found Zierold Metal Co. Zierold was into precision aluminum work, and that was the future in sheet metal.”

Gilbert offered Zierold $350,000 for the company, with a $50,000 down payment raised by mortgaging his home. Gilbert and Zierold agreed that Zierold would finance the rest; if Gilbert missed installments, the business would revert back to Zierold. According to Gilbert: “Herman went down the street and made a bet with a scrap dealer that he’d have the business back in a year.” By the time Gilbert paid off the last of his installments, however, Herman Zierold was accepting stock in the company instead of cash.

In the postwar years, Los Angeles and other areas were overcrowded with sheet metal companies, but Gilbert’s former association with Douglas led him in a direction that would help Zierold stand out from the rest. From friends at Douglas, Gilbert learned that company was purchasing precision aluminum boxes to cover their electronic systems, paying as much as $600 for a custom-made box to house electronic components. As Gilbert told Forbes, “I couldn’t believe it. I thought those parts ought to sell for about $35.”

Gilbert set out to produce a box that was simple and inexpensive to make, developing a process to make deep-drawn boxes. In the deep-drawn process, aluminum was subjected to pressures high enough to press—rather than stretch—the metal around a die, creating a seamless box. Because the metal was pressed, causing its molecules to flow around the die, the process eliminated the weaknesses associated with stretching metal. By developing his own dies, Gilbert was able to produce boxes in standardized sizes far more quickly and economically than if the boxes needed to be custommade. Gilbert began taking orders from the aerospace and electronics industries for boxes of various sizes. The company bore the cost for designing and building the dies, which at the time cost between $300 and $1,200, eating into the profits, if any, of an order and placing a heavy financial burden on the company.

By the mid-1950s, the strain of producing the dies forced Zierold to turn business away. Gilbert sought financing, but he worried about losing control of the company. A Small Business Administration loan, however, kept the business afloat, and in 1957, Zierold received new help in the form of a $250,000 investment by Alfred Reddock, a venture capitalist. After Reddock agreed to join the company’s board of directors, Zierold gained the credibility it needed to go public, which it did in 1959. A name change soon followed. For years, many of the company’s customers had been mistaking “Zierold” for “Zero,” going so far as to make out checks to the company under that name. In response, Gilbert changed the company’s name to Zero Manufacturing Co.

Over the next decade, the company continued building its collection of dies. An acquisition offer in the mid-1960s by Bendix led Zero to expand its operations beyond California. With no intention to sell, Gilbert nonetheless met with Bendix in order to discover the reasons behind that company’s interest in Zero. Learning that Bendix was intent on acquiring sheet metal operations located near the Californian, Southern, and New England aerospace markets, Gilbert traveled to manufacturers in those areas, signing on such large concerns as Martin Marietta and Raytheon as Zero customers. Soon after, Zero opened manufacturing facilities in Massachusetts and Florida. Despite gaining such large companies as customers, Gilbert remained determined that no company would account for more than 5 percent of Zero’s sales; as a result orders generally averaged $10,000 or less.

A BRIEF STUMBLE

Gilbert next sought to diversify the company’s operations. In 1969, Zero purchased the Halliburton luggage-making operations from the Halliburton oil service company. The Zero Halliburton line soon gained worldwide fame. Sales of the line of luggage and cases for photographic equipment rose from $200,000 at the time of the acquisition to nearly $3 million by the end of the 1970s. The company next moved into producing aircraft hydraulic systems and related aircraft devices. Zero’s reputation was also enhanced by being chosen to build the cases that would transport moon rocks gathered from the first lunar landing back to Earth.

The company stumbled in the early 1970s. Pursuing a plan to round out the company’s operations, Zero made a number of other acquisitions seeking to bring the company into the heating and cooling business. However, a downturn in the economy, and especially in the electronics industry, cut deeply into Zero’s profits and caused the company to post operating losses—including a $2 million write-off from selling its new acquisitions—in the first two years of the new decade. By 1973, Zero again turned profitable, earning $600,000 on sales of $22 million. The company changed its name again, to Zero Corporation. The company’s success, particularly the success of its deepdrawn manufacturing process, had already caused the zero box to become a generic name in the electronics and aerospace industries.

COMPANY PERSPECTIVES

As the leading manufacturer of both aluminum and plastic enclosures, ZERO exceeds customer’s expectations by offering unparalleled protection and creative custom designed manufacturing solutions for any type of case, enclosure, or standardized product.

Zero’s collection of dies had grown to over 1,500, which gave the company an edge over competitors making costlier custom-made enclosures, while discouraging others from entering the field in direct competition with Zero. By the late 1970s, nearly all of Zero’s die collection had been fully amortized. With customers including 35 of the 50 largest computer manufacturers in the United States, such as IBM, Burroughs, and Digital Equipment, sales reached $66 million by 1979, with net earnings of $4.7 million, and a five-year compounded growth rate of 25 percent. The following year, Gilbert retired from full-time management of the company and was replaced by Howard W. Hill. Two years later, Hill was joined by Wilford “Woody” Godbold, a former mergers and acquisitions specialist with Gibson Dunn & Crutcher, a Los Angeles law firm. Godbold, who was raised in Hawaii, went to Stanford University as an undergraduate, and received a law degree from the University of California at Los Angeles after a stint in the Navy, had served as Zero’s corporate counsel before joining the company as executive vice-president. When Hill retired in 1985, Godbold took over as chief executive officer.

Under Godbold, the company again began a series of acquisitions to diversify operations, buying eight companies in the first half of the decade for a total outlay of about $20 million. These new acquisitions—for example, the 1985 purchase of Contempo Engineering Co. of Glendale, California, a maker of air conditioning systems for computer installations—centered primarily on the electronics industry. The company’s customer base grew to include 187 of the 200 largest electronics manufacturers, giving Zero an 85 percent share of the enclosure market. Zero’s production facilities had grown to include 16 plants in the United States and England. By then, rather than contracting Zero to custom-make a die, many manufacturers were designing their electronics equipment to fit one of Zero’s 1,700 basic dies, which had expanded to provide capacity for some 40,000 box sizes ranging from a few inches to six-foot boxes used to house Stinger missiles. “But there always seems to be one more size we haven’t made,” Godbold told the Los Angeles Business Journal, and Zero continued to design and produce custom dies for new orders. Most orders involved short production runs, producing high margins for the company—generally 9 to 10 percent, compared to 3 percent among most metal manufacturers.

Zero’s 1985 sales topped $117 million, bringing net earnings of $11.5 million, which included a $7 million gain from the sale of its Ocean Technology subsidiary. Aiding Zero’s growth was the growth of its subsidiaries, particular its Electronics Solutions subsidiary, a computer manufacturing subcontractor acquired in 1985. Between 1987 and 1988, revenues jumped from $139 million to $171 million, with a rise in earnings to $16 million in 1988.

MOVE TO UTAH

However, a slump in the electronics industry and cuts in defense spending as the Cold War ended, coupled with a slide into a recession as the 1990s began, slowed Zero down. Sales, which neared $200 million in 1990, fell to $160 million. Per share income also dropped, from $1.02 to $0.62. In an effort to cut operating costs, Godbold moved its Los Angeles factory to North Salt Lake, Utah, slashing the company’s expenses for workers’ compensation, healthcare, and wages. The company consolidated a number of its remaining California plants to cut operating costs further. Godbold, who served as chairman of the California Chamber of Commerce, was widely criticized for the move. Yet, as Godbold told World Trade, “It wasn’t an easy thing for us, but the costs of doing business in the state were eating us alive. We had to do it to remain competitive.”

KEY DATES

1938:

First Halliburton aluminum attaché case designed by Earle P. Halliburton, Sr.

1952:

Jack Gilbert acquires Herman Zierold’s sheet metal business.

1959:

Zierold Manufacturing goes public, is renamed Zero Corporation.

1969:

Zero buys luggage-making operations of Halliburton oil service company.

1991:

Zero’s manufacturing operations relocated from Los Angeles to Salt Lake City.

1998:

Applied Power Inc. (APW) acquires Zero Corporation in a stock swap.

2002:

Zero’s Utah operations acquired by Blue Point Capital and the principals of Cascade Consolidated Industries (CCI).

2007:

Japanese luggage maker ACE Co. Ltd. buys Zero Halliburton brand.

The Utah move helped spur the company’s sagging profits. Zero also began a new wave of acquisitions, including the 1993 purchase of J.H. Sessions & Sons of Connecticut, which manufactured case hardware such as handles and hinges and other materials for annual sales of $4 million. Orders from the airline industry also picked up—after a long slump due not only to the recession, but also to fears of terrorism surrounding the Gulf War—including a contact to supply baggage/cargo systems to 50 of United Airlines’ Airbus planes. Yet the company’s foreign sales were hurt by the slide into the European recession, which saw international revenues drop from over $21 million in 1992 to $15.5 million in 1994.

Total sales grew only at 4 percent between 1992 and 1995, as compared to the company’s former 18-year, 25 percent average growth rate. Nonetheless, Zero remained solidly profitable, with net earnings climbing from $9.7 million in 1991 to nearly $15 million by 1994. In 1995, Zero began acquisitions of three new companies, Precision Fabrication Technologies, which manufactured modular enclosures, data communications products, and accessories for the electronics and telecommunications industries; Electro-Mechanical Imagineering, Inc. (EMI), a maker of enclosure, mounting, and protective devices for closed-circuit television security devices; and G.W. Pearce & Sons Ltd., a U.K.-based deep-drawn aluminum products manufacturer. Combined, these acquisitions added $16 million to Zero’s revenues. Total revenues reached $206 million in fiscal year 1996, producing net earnings of nearly $17 million.

Several more acquisitions followed in the first half of 1996. The Zero Halliburton line expanded to include cases for the booming mobile computing market. In January 1996, Zero launched a new subsidiary, Zero Integrated Systems, to design, engineer, and manufacture completely integrated electronic systems, as well as to provide cost analysis and quality testing services. After more than 40 years, Zero had at last moved inside the box.

BUILDING AN ELECTRONICS PACKAGING LEADER

In the mid-1990s Zero Corporation rolled out other additions to the consumer line besides cases for laptop computers. It added wheels to some models to accommodate traveling businesspeople. A handful of new colors were introduced as an alternative to the traditional brushed aluminum finish. Zero also brought out a new line of purses for executive women.

As the consumer business evolved, a number of acquisitions expanded Zero Corporation’s industrial operations. The company bought Cambridge Aeroflo Inc., which made electronic thermal controls, in July 1996. Massachusetts-based Aeroflo did about $5 million worth of trade a year. EG&G Birtcher Inc., a maker of specialized hardware for the electronics industry, was bought out in September 1997. Founded in 1936, Birtcher had annual sales of about $9 million. Zero also sold a business in 1996—Anvil Cases Inc., best known for making rugged, fabricated cases for musical instruments. Zero had acquired it eight years earlier.

A much larger deal followed in 1998, when Zero Corporation became a subsidiary of Applied Power Inc. (APW), a publicly traded manufacturer of enclosures for electrical and electronic equipment. APW was based in Butler, Wisconsin, and had global reach and annual revenues of more than $1 billion. The all-stock transaction valued Zero Corporation at about $386 million. Zero was the tenth enclosure manufacturer bought by APW in a two-year span.

Business was booming, thanks to a resurgent electronics industry, which accounted for about 80 percent of Zero Corporation’s $225 million in revenues in fiscal 1996–97. The famous Zero Halliburton cases made up only 10 percent of the total. The company was profitable, though the small U.K. operations were losing money. Zero then had about 2,000 employees overall. Record sales and earnings continued in the fiscal year ended March 31, 1998, when revenues reached $258.7 million.

According to company insiders, there was a bit of a culture clash between entrepreneurial Zero and its more conservative new owners. APW sold Zero’s Utah operations in February 2002. These were acquired by Blue Point Capital and the principals of Cascade Consolidated Industries (CCI). At the same time, a subsidiary was set up in the United Kingdom, following the acquisition of certain assets of Air Cargo Equipment (UK) Ltd.

NEW MATERIALS

Known for its aluminum products for decades, Zero Halliburton was experimenting with new materials. Products included leather, ballistic twill, and carbon composite cases (the latter selling for $3,000) designed to echo the famous curves unique to the brand. A collection of ladies’ handbags and accessories for both men and women was made available at the same time. The industrial division, Zero Manufacturing, had also ventured into new materials, namely plastic and carbon fiber.

Zero Halliburton luggage continued to command a great deal of visibility via the entertainment industry. By 2005, the cases had been spotted in more than 200 movies. The company was developing special cases for professional D.J.s, while maintaining a profile at music video awards parties. At another Beverly Hills event, Aston Martin gave a set of Zero Halliburton luggage to the first person to buy its $125,000 Vantage automobile.

By mid-decade Zero Corporation had sales approaching $40 million a year, with more than half coming from the industrial side. In June 2006, Zero Corporation got a new CEO, Stephen Henderson. A native of Scotland, Henderson had held a number of management positions in the aerospace and process industries before serving as CEO of McKechnie Aerospace.

ZERO HALLIBURTON SOLD

Six months later, in January 2007, Japanese luggage maker ACE Co. Ltd. bought the Zero Halliburton line from Zero Corporation in January 2007. ACE had previously been the brand’s distributor. The divestiture freed Zero Corporation to concentrate on its industrial enclosures business, while ACE planned to expand Zero Halliburton sales threefold through new product introductions. Zero Corporation had found a new distributor for its industrial cases in Japan, one of the country’s leading enclosure manufacturers (Settsu Metal Industrial).

M. L. Cohen
Updated, Frederick C. Ingram

PRINCIPAL SUBSIDIARIES

Zero Cases (UK) Ltd.; Zero Manufacturing, Inc.

PRINCIPAL COMPETITORS

Anvil Cases Inc.; APW Ltd.; BAE Systems plc; JMR Electronics, Inc.; Pentair, Inc.; Rittal Corporation.

FURTHER READING

“Ace Buys U.S. Briefcase Maker Zero Halliburton,” Nikkei Report, January 11, 2007.

Akst, Daniel, “Zero No Mere Cipher in Electronics Packaging,” Los Angeles Times, September 10, 1985, part 4, p. 5A.

Beach, Geo, “Samurai Briefcase: An Airtight Case for Rugged Luggage,” Forbes, March 10, 1997, pp. S159f.

Breskin, Ira, “Zero Corp. Looks for Growth from Its Electronic Containers,” Investor’s Business Daily, January 23, 1998, p. B14.

Cole, Benjamin Mark, “Zeroing in on Profits,” Los Angeles Business Journal, November 22, 1993, pp. 12–13.

Fullmer, Brad, “Zero Halliburton Containers House Everything from Movie Star Wardrobes to Nuclear Launch Codes,” Enterprise (Salt Lake City), October 10, 2005, p. S4.

Galvin, Andrew, “Managing to Become Owners; A Trio of Supervisors Proposed Helping an Anaheim Steel-Enclosure Business Grow So That They Then Can Buy It,” Orange County Register, April 28, 2003, Tech. Sec., p. 1.

Hunt, Nigel, “Applied Power, Zero Corp. Agree to Merge,” Reuters News, April 6, 1998.

Koerner, Brendan I., “You Can’t Crush the Music,” New York Times, Bus. Sec., April 23, 2006, p. 2.

Lasky, Michael S., “The Case of the Hidden Notebook,” PC World, May 1997, p. 86.

“Lights, Camera, Brands; Product Placement,” Economist, October 29, 2005.

Merwin, John, “Getting Rich on Little Nothings,” Forbes, September 1, 1980, p. 104.

Thuermer, Karen, “California Rebuilds Economy, Image with the Help of Exports,” World Trade, April 1996, p. 62.

“Utah Proves to Be the Right Place for Revitalizing Profits,” Barrons, October 11, 1993.

Warchol, Glen, “Utah Company’s Attaché Case Is a Hollywood Staple,” Salt Lake Tribune, June 4, 2005.

“Zero Corp. Carves Out Expanding Niche in Field for Computer Cases,” Barrons, February 6, 1978, p. 42.

“Zero Corp. Interview: Focus on Electronics Markets,” Dow Jones News Service, May 12, 1997.