Statesman Journal from Salem, Oregon • Page 37

STATESMAN JOURNAL SUNDAY INSIDE Advice: 2 Stocks: 4-6 Transactions: 7 February 13, 1994 Salem, Oregon Business Editor Scott McFetridge 399-6738 hi Commentary Jane Bryant Quinn Tec Laboratories Location: Albany Industry: First-aid products for outdoor workers Founded: 1978 by Dr. Robert Smith President: Steve Smith 1993 Sales: $2.5 million LOTION: Steve Smith, president of Tec Laboratories in Albany, shows the company's latest product, Cala-gel, a clear calamine-type Videx Location: Corvallis Industry: Bar code readers Founded: 1979 President and founder: Paul Davis Sales: Declined to disclose MONITORING: Chen Yang, a quality control technician at Videx in Corvallis, works on the company's OmniWand Data Collectors. rfWv fcfc-" urn? vi New rating offers look at risks of bond funds 7k- )DW(i(o Wry These Oregon businesses aren't household names, but they've found success by knowing their niches and continually improving their products to meet their markets' needs I By Sherri Burl The Statesman Journal Oregon-based Nike and Fred Meyer enjoy instant name recognition and high visibility, but have you ever heard of Tec Laboratories or Dartron Industries? Even if you know what those i i rio tt. m- 1 companies produce and where they're based, ou probably don't know that they are rising stars in their industries. These businesses didn't get to where they are today Paul Davis: President of Videx I i Timothy J.

GonzaleaStatesman Journal ON THE WAY UP: Doug Morgan of Darton Industries sits on a segment of a Super Slide in the company's production site in south Salem. with just a good idea. Start-up specialists say the idea is essential, but so are market research, smart decisions about pricing and new product development, and ongoing improvement. Refining a market Which came first, the product or the market? Unlike the chicken and egg conundrum, local entrepreneurs can answer that question. For example, more than 30 years ago, biochemist Robert Smith developed a product idea that eventually would launch Tec Laboratories in Albany.

At the height of the Cuban missile crisis, Smith concocted a waterless cleaner to remove radioactive dust from fallout shelters. But a need for the product never materialized. Years later when Smith's wife, Evelyn, and their children washed with the cleaner after playing in their back yard, which was thick with poison oak, they found it prevented skin irritation. The real trial, though, was finding a market for the new cleaner, called Tecnu. Smith attempted to sell it to drug stores, but consumers weren't interested.

"It's like buying a funeral plot before you need one," said company president Steve Smith, the NEW YORK How risky is a bond mutual fund? Investors will eventually have better answers to that question than they're getting now. Standard Poor's, which evaluates the safety of bonds, has started a new service to rate bond funds against a wide variety of risks. It started last month with 19 funds and hopes to list about 150 by the end of Fitch Investors Service started rating bond mutual funds last June. So far, three have signed on publicly, but Fitch says that a few more will be announced soon. Obviously, this new rating business is still too small to give most investors the help they need.

But it's a long step in the right direction. The special value to investors is the way these ratings examine risk. Standard Poor's already rates 146 bond funds for "default risk" meaning the risk that they might not pay principal and interest on time. The rating scale runs from AAA for funds that are super-safe to CCC and below for those with a lot of defaulting bonds. But just because you own a AAA-rated Treasury bond fund doesn't mean you can't lose money.

You face some degree of "market risk" meaning that the price of your bond fund (hence the value of your investment) will rise and fall. How much its price is likely to change depends on the type of fund you have. When interest rates rise, the value of some funds falls modestly while the value of others falls a lot. That's the risk these new services measure. Many bond funds are running more risks than investors understand.

In- -ternational funds, for example, are by definition invested in foreign currencies. When the dollar gains in value, those currencies will be worth less, which will lower an international fund's return. Similarly, yields will rise when the dollar declines. Here at home, U.S. funds may buy complex securities called derivatives derived by chopping up bonds into their component parts.

For example, one type of derivative collects only bond interest, never principal. Another type collects only principal when the bond is paid off. Depending on how derivatives are used, they may reduce a bond fund's risk or they may increase it. Funds with higher-than-average yields are probably using derivatives in a speculative way. That's something investors would want to know.

Most of the mutual-fund risk ratings now available are calculated from the fund's past performance, according to managing director Sanford Bragg. The new approach looks at historical data but also tries to predict how bond funds will act in the future. The price of a short-term Treasury fund won't change very much. So it gets highest market-safety rating "aaa." All these new ratings are in lower-case letters, to distinguish them from credit ratings which are upper-case. Funds that buy long-term Treasury bonds, however, take wider price swings, so their market-safety rating drops to A high-yield-bond fund can yo-yo even more, so its rating might drop to a "bb." There's nothing wrong with buying lower-rated funds.

When you take more market risk you usually get a higher return over the long run. But you need to understand what you're doing so you won't be shocked at the times when your fund price declines. has an excellent free guide to understanding bond funds called Standard Poor's Guide to Bond Fund Safety. You can get it by calling 1-800-424-FUND. But be warned that calls are pouring in and you may get a busy signal.

You can also write to at P.O. Box 4634, Trenton, N.J. O8650. It takes about a week to mail out the brochures. You can use that same 800 number to get free ratings on bond funds, but so few are on the system that it's hardly worth asking yet.

There are some 1,600 bond funds available to investors. So even with 150 funds on line, will only be scratching the surface. But the use of ratings may spread. This is critical information, that helps investors make the right bond-fund choice. Jane Bryant Quinn is a nationally syndicated personal finance columnist.

founder's son. "People just don't think about it." Steve Smith renewed marketing research on Tecnu in 1978. He discovered poison oak and ivy irritation was the No. 1 workers-compensation claim among the Oregon State University forest crew, so he focused on outdoor workers. In 1980, Pacific Bell signed on as the company's first major client.

Since then, Tec Laboratories has cornered the outdoor market and has introduced six products, including a clear calamine-type lotion called Cala-gel. In contrast to his father's discovery of Tecnu, Steve Smith envisioned Cala-gel's market first, then asked his attorney's billable hours, the firms's biggest challenge has been educating buyers. Rather than selling directly to more than 50 industries that use the scanners, Videx focuses on major buyers, who resell the equipment. Videx markets primarily through trade shows for the bar-code systems industry. It also targets computer companies because the data from the scanners can be downloaded to computers, eliminating the errors of data entry.

Videx now focuses exclusively on the data collection devices, which are sold in 45 countries. Please see Market, Page 3E businesses to compete unless they're doing something very specific that the big companies can't or won't do," he said. A corporate identity Paul Davis founded Videx Inc. in Corvallis in 1979. At first, the company made systems for' Apple II computer screens.

But when the company developed equipment to read bar codes those lines the cashier scans at the grocery to track its own inventory, Davis suspected the gizmo might have broader appeal. Because applications for Videx scanners are so diverse, from recording videotape rentals to tracking an father to create a product. Seizing on the consumer craze for clear products, from Pepsi to Ivory dishwashing liquid, Smith suggested they take the pink out of calamine lotion. Cala-gel, introduced in January 1993, accounted for one-fourth of the company's $2.5 million in sales last year. Finding a niche first, then developing a product is the best way for start-ups to survive, according to Tom Mon-son, a small-business consultant in Medford.

The onset of national retailers such as Wal-Mart and Costco has made the entrepreneur's job even harder, according to Monson. "It's almost impossible for small Activists' anti-golf movement comes to the fore course architects once would have filled in wetlands, they now make them part of the hazards, albeit by federal mandate. "There is definitely more recognition that there are a lot of issues to consider that we had not really thought about before," said Nancy Sadlon of the U.S. Golf Association, which sponsors the U.S. Open and 12 other major tournaments.

The USGA hired her as an environmental specialist three years ago. In Oregon, which has some of the strictest agricultural preservation laws, plans for 10 new courses on land zoned for farm use were filed in the three-year period from 1989 to 1992 with the Department of Land Conservation and Development, according to spokesman Mitch Rose. The land use group, 1000 Friends, is fighting several of these, including the course Von Lubken thinks has been built around him to drive him out of business and make room for a housing development. For Von Lubken, whose son wants to continue the family tradition of farming, golf course development has made land scarcer and too expensive. "Dollars," Von Lubken said, "seem to be able to buy anything." and erode a last vacant stretch of agricultural land.

Across the country and around the world, a growing number of citizens, environmentalists and farmers some of them golfers themselves are forming odd alliances to fight the increasingly popular sport. Golf courses, they say, use alarming quantities of pesticides and fertilizers, require extravagant amounts of often scarce water, displace valuable farmland and the people who farm it, drive off wildlife and native vegetation, erode soils and hillsides to cater to the elite who can afford the expensive sport. There are 14,375 golf courses in the United States (and about 25,000 worldwide); another 1,208 are planned or under construction, says the National Golf Foundation. In 1970, there were 10,848 courses. In this country there is no organized movement against the sport, nor any estimate of how many planned courses are being opposed or existing ones questioned on their management practices.

By scattered reports, however, it is obvious that more people are challenging construction of new courses. In the past few years, largely because of pressure from citizens and environmental groups and partly because of gov- By Ellen Hale Statesman Journal news service Fritz Von Lubken is a fruit farmer in the Hood River Valley of Oregon. But these days he's dodging golf balls, not falling apples. Von Lubken's 60-acre orchard, run by his family since 1913 on some of Oregon's richest agricultural land, has been partly encircled by a golf course built on land zoned for farm use. Golf balls whiz by his workers as they stand on 12-foot ladders picking fruit.

Balls get swept up in his mowers and come shooting out like errant missiles. Crop dusters have stopped spraying sections of his orchard, fearful of the slices and hooks. Trees planted on the golf course have created dead pockets of air in the orchards so that Von Lubken must erect $40,000 worth of fans to keep his apples and pears from freezing. Von Lubken and local activists have sued, and the state will rule on their complaints later this year. But even he admits that there is little chance of turning the links back into farmland.

Meanwhile, surfers in California are fighting developers and county officials about plans for a golf course on a stretch of coast near Santa Barbara that critics charge will cut off their access to beaches, endanger harbor seals and pollute Max GutierrezStatesman Journal CONFLICT: Fritz Von Lubken surveys a golf course he says was illegally built next to his orchard in Hood River, Ore. ernment regulations, golf organizations have begun pushing what they consider environmentally sound practices. A growing number of courses, the golf industry claims, use organic methods of controlling insects and fungus on turf and promoting more natural, less groomed, fairways. And where golf.