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Friday, October 11, 2002 - Page updated at 12:00 AM

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Woodinville audio maker Mackie Designs cutting back

Seattle Times Eastside business reporter

The producer of Courtney Love's first album has tried a lot of audio equipment, but he keeps coming back to the same brand again and again.

"I get more performance from their equipment for the dollar than I can get from anything else that meets my needs," said Jeff Hermann, owner of FullSound Recording of Seattle, who has used Mackie products for five years. "Mackie's built like a tank. It's something you can take on the road and rely on. And it's a great bang for the buck."

Thanks to customers like Hermann, Woodinville-based Mackie Designs has grown into a $22 million company that counts record producers for Tina Turner and Cher among its customers. Although that renown has given the company a glowing reputation among musicians, it has not helped its bottom line.

In 1995, the year the company went public, it made $11.7 million profit. That has decreased almost every year since, with the company posting its first annual loss of $5.3 million last year. In the six months ended June 30, it lost $1.6 million.

So now, thanks to flagging sales and a sputtering audio market that has been down for the past two years, Mackie must scale back. Part of the cost-cutting includes laying people off and moving part of its production to overseas.

"At the end of the day, we need to give a decent return to our shareholders," said Chief Executive Officer Jamie Engen. "Unfortunately, labor is our second biggest cost behind our products."

Layoffs aren't new at Mackie. The audio company has been cutting employees since last fall and expects to cut more in the coming months. More than 180 people have been laid off, and 177 more will lose their jobs as the company moves the majority of its production to China. That move should be completed by the second quarter of next year, Engen said.

Current and former employees are unhappy about the move.

"Moving production to China is like a stab in the heart," said a former employee who asked not to be named. "People have really worked hard, and they feel like they've been sold down the river."

But company officials and audio experts say moving production lines makes sense. Most U.S. audio companies moved their manufacturing overseas in the late 1990s to better compete with large Asian competitors, such as Yamaha and Sony. Mackie has wanted to retain complete control over its production lines and has resisted moving overseas, said George Petersen, editorial director of Mix Magazine, a professional audio publication.

But cutting jobs isn't the only cost-cutting measure the company has been pursuing. During the third and fourth quarters of 2001, the company reduced salaries and capital expenses and closed some offices, its annual report says. It also is trying to decrease its sales costs by finding cheaper sources for parts and is considering selling off certain operating assets, this year's second-quarter report says.

Struggle to cut costs

Mackie Designs


Founded: 1988 by Greg Mackie
Headquartered: Woodinville
Business: Develops and makes professional audio equipment
Chief executive: Jamie Engen
Employees: 437 as of Oct. 1
Sales: Second-quarter sales of $48.8 million were down from $54 million last year. Annual sales were down slightly from $207.5 million in 2000 to $206.5 million in 2001.
Stock price: Closed at $1.65 yesterday, down 5 cents
52-week high: $4.90
52-week low: $1.61
Sluggish sales have complicated Mackie's attempts to cut costs. In the second quarter, sales were $48.8 million, down from $54 million during the same period last year. Annual sales fell slightly in 2001, to $206.5 million from $207.5 million in 2000.

Mackie needs to cut expenses not just to offset slower sales, but to pay off its loans from previous acquisitions. The company owes $62.5 million and has had problems keeping up with its payments, according to filings with the Securities and Exchange Commission.

The company bought Sydec, a Belgian software and electronics developer, in April 2001; Radio Cine Forniture, an Italian loudspeaker and speaker-component maker, in June 1998; and Eastern Acoustic Works, a Massachusetts designer and producer of loudspeaker systems, in April 2000.

Despite the company's problems, Engen remains upbeat. He said Mackie plans to increase its overseas presence, roll out new products and bring its products into smaller venues, like doctors' offices and restaurants.

Consumers aren't counting the company out.

"Mackie is one of our staples," said David Angress, executive vice president and general merchandising manager with Guitar Center, a nationwide chain of instrument stores that has carried Mackie products for eight years. "It's one of the top brands in the professional audio market, and it's a tremendous value. They've been innovators from the start."

Greg Mackie founded Mackie Designs in 1988 to make a low-cost, high-quality mixer — something that didn't exist at the time. In the late 1980s, mixers were either noisy and cheap or so expensive that only professional musicians and large recording studios could afford them.

"Mackie absolutely revolutionized the professional audio market," Petersen said.

Founder's background

Greg Mackie knew what he was doing. Before founding Mackie Designs, he started two other widely acclaimed audio-equipment companies, Technical Audio Products in 1970, a producer of professional music mixers, and Audio Control in 1978, which designed and made equalizers and analyzers.

Like his two other companies, Mackie Designs grew quickly. And in 1995, Mackie took the company public and moved it to Woodinville. He was chairman until last month, when he resigned to devote more time to product development.

Mackie, 52, remains on the board as a director and chairman emeritus. He did not return calls for further comment.

Kristina Shevory: 206-464-2039 or kshevory@seattletimes.com.

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