Sound Vibrations -- Phoenix Gold Has Turned Up The Volume

STARTING OUT with speaker cables, Keith Peterson's Portland company has taken hold of the growing market for car and home-theater amplifier systems.

PORTLAND - Keith Peterson loves the bone-jarring bass of a big car stereo.

"I call it the bass that ate the Earth," he said.

His company, Phoenix Gold International, has ridden to success on the cresting wave of popularity for rap and heavy metal. Unlike his father, retailer Tom Peterson, an advertiser who gained celebrity on local television, the entrepreneur has built his business on word of mouth.

Phoenix Gold car audio components, such as the monster amplifier Son of Frank Amp'n Stein, are a hit among young audiophiles who rave about their distortion-free sound quality.

"It's good stuff, and it packs a lot of power," said Aaron Underdahl, 22, who has used an $8,000 audio system to compete in car-sound contests.

The competitions are a modern version of the drag race, featuring cars with muscular audio systems instead of V-8 engines.

"With the emissions control now, kids don't go for the big engines so much. They invest in audio systems," said Peterson, 42.

"It's mind-boggling what's available," said Underdahl. "You can go insane thinking about what amps to go with."

While much of the consumer-electronics industry has moved to Asia and factories in Mexico, Peterson has written a hometown success story by building a factory with 260 employees beneath Portland's St. Johns Bridge.

"This is one segment of the industry where American products are perceived as the best, even overseas," Peterson said.

The company's main rivals are a handful of small- and medium-size U.S. companies.

Boosted by strong demand, Phoenix Gold issued 1.1 million shares in an initial public offering at $6.75 last May.

The stock has nearly doubled in price since then.

Several analysts who were associated with the company's initial offering predict strong growth will continue. In 1995, earnings grew 17 percent to 67 cents a share, and revenue rose 25 percent to $20 million.

Thomas Carley, an analyst for Jensen Securities, said the company burnished its reputation last November by acquiring a unit producing Carver Professional sound amplifiers and equipment from Carver Corp. in Lynnwood. The equipment is used in large arenas for rock concerts and sporting events.

The company hopes to broaden its appeal to families and older consumers with marketing and new products, including a line of audio components for home theaters. "This could be a $50 million business in the foreseeable future," said Marcus Robins, an analyst for Portland's Red Chip Review who has been a consultant for Peterson.

As a youth dusting televisions in his father's shop, Peterson watched Japanese brands eclipse U.S. giants such as General Electric and Philco. After studying at Oregon State University and Waseda University in Tokyo, he collected ideas for starting his own company while working for JVC, a Japanese electronics maker, and Advent Inc., a Boston speaker maker.

In 1984, Peterson wrote a business plan on butcher paper and launched the company, selling speaker cables with gold-plated connectors, from a corner of his father's shop.

He later merged the business with his father's company.

After an ill-fated acquisition of Stereo Super Stores, his father's holding company, XTI-Xonix Technologies Inc., filed for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.

Just before the filing, Peterson and a partner bought the assets of the car-audio company for $1.2 million in cash and $250,000 in preferred stock.

Peterson links the company's success to good marketing, learned from his father, and to the strategic advantages of a U.S.-based work force.

Peterson said his Portland-based work force gives Phoenix a big edge.

"We can be much quicker and much more responsive to the market," Peterson said.

"We can keep our parts in the rawest form. We can turn on a dime and turn out different products when consumer demand changes."

Tom Peterson, who has launched a new retail store, said he's had little part in his son's success, except to offer a few business pointers.

"He's done a good job. In fact, he's done better than his dad," Tom Peterson said.

"He started with nothing. Now he's got a big public company."