Optiva's brush with the big time

To hear the folks at Optiva tell it, missing out on an initial public offering has turned into a blessing.

The Snoqualmie-based maker of the popular Sonicare power toothbrush did get a big-money infusion yesterday, although not the one it initially was looking for: It announced a deal to be sold to Philips Electronics, the Dutch consumer-products giant.

As part of the deal, which is subject to regulatory approval, the Sonicare brand name will remain, the companies said. Financial terms were not disclosed.

The move enables Optiva, a privately held company with 600 employees and $175 million in projected sales this year, to use the global distribution and the research-and-development muscle of a $31 billion company known for its color-TV sets, Norelco shavers and semiconductors.

For Philips, the acquisition means a chance to capitalize on the strong brand recognition, dentists' recommendations and leading U.S. market presence of Sonicare toothbrushes.

"I was careful in selecting Philips to make sure they'd be a good parent for my child," said Optiva Chairman and Chief Executive David Giuliani, an engineer who founded the company in 1988. "They're good people."

Under the deal, Philips will shift its domestic appliances-division headquarters to Snoqualmie, where Optiva has been since April 1999.

The acquisition makes Philips second in the global market for electric toothbrushes, with the goal of growing here and toppling the world leader, Gillette.

Philips makes a power toothbrush under the Sensiflex name, which is popular in Europe but not in the United States.

Sonicare toothbrushes work differently than those popular in Europe by using sonic waves and motion to blast away plaque. They also cost more--about $90 each. Still, Optiva has garnered about 46 percent of the market share for power toothbrushes in the United States, measured by sales. The brushes are sold on a limited basis in 17 other countries.

"They've demonstrated great success in building a business, and we hope to build on that success," said Rich Sorota, senior vice president of marketing for Philips.

Consultant job part of deal

Giuliani will serve as a consultant to Optiva and Philips while focusing more on heading Junipa Labs in Bellevue, a division that will be spun off as part of the deal. There he will head up an entrepreneurial division that makes oral-care products such as mouthwash and toothpaste, plus skin-care products.

Giuliani wouldn't say how much money he's getting in the sale, but company spokesman Kevin Bush said, "David will be a wealthy man because of this."

Employees said the acquisition had been rumored, but they were notified only about 10 minutes before the public announcement. Some appeared jittery about the move, but they were reluctant to talk about it publicly.

When asked about possible layoffs, Philips executives said only they intended to grow the combined operation.

Giuliani held sessions yesterday with employees, many of whom wondered about the status of their Optiva stock options. The options automatically will be vested, which means many employees will receive immediate bonuses, Giuliani said.

Three years ago, Optiva was hailed by Inc. Magazine as the fastest-growing private company in the nation. Since then, the company has grown steadily: from $103 million in sales in 1997 to a projected $175 million this year.

After drawing the national spotlight, the company did hit some rough spots. It backed away from an attempted public stock offering a year ago when the market was shunning anything non-dot-com. Around the same time, it had to pay a $2.5 million penalty after a jury ruled it had used false advertising against Gillette's Braun Oral-B Plaque Remover. Optiva's ads claimed that the Braun toothbrush increased the risk of contracting gum disease, and that Sonicare more effectively reduced the risk of gum disease.

Looking to the future

With that in the past, Giuliani is now looking ahead.

"My vision in a couple of years is that The Wall Street Journal or Harvard Business Review will do a study and see us as a classic success in mergers and acquisitions, because many don't work," he said. "I think it will work because of the similarities in culture, and synergies with respect to technology, markets and skills."

Luke Timmerman's phone message number is 206-515-5644. His email address is ltimmerman@seattletimes.com.

Optiva

** Headquarters: Snoqualmie

** 1999 sales: $160 million

** Employees: 600

** Product: Sonicare toothbrushes

** Competitor: Gillette's Braun Oral-B Plaque Remover

Philips

** Headquarters: Amsterdam, Netherlands; North American headquarters in New York

** 1999 sales: About $31.5 billion

** Employees: 232,433

** Products: Television sets, lighting, Norelco electric shavers, semiconductors

** Competitors: Matsushita, Sony, Thomson Multimedia, Gillette, General

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