Robinson brothers navigating their way to the top

Rakon could be the poster child for New Zealand business.

It was founded as a maker of radio crystals by Warren Robinson, 71, in the basement of his Howick home in 1967.

Sons Brent (managing director) and Darren (marketing director) have made it a world leading manufacturer of high-performance crystals and oscillators, essential components of Global Positioning System (GPS) navigation hardware.

Just 5 per cent of its products are sold in New Zealand with the rest sold to the world, many to the world's leading engineering companies: Motorola, Siemens, Ericsson and Samsung.

Some of their products end up in the hands of the world's defence forces. But the company does not like to talk about it, especially after the products were linked with smart bombs in Iraq.

Meanwhile, Rakon has picked up numerous awards, including New Zealand Trade and Enterprise's 2005 Supreme New Zealander Exporter of the year. Sales stood at $70 million last year and are growing in line with the 20 per cent to 30 per cent rise in the wider market.

This week, Rakon unveiled the world's smallest GPS receiver - the size of a baby's fingernail. And now, eyeing the huge potential for the inclusion of its products in the 500 million to 600 million mobile phones and the 70 million to 80 million cars manufactured each year, it is considering a stock exchange listing.

In short, if more New Zealand companies followed its lead, the country would be making headway in resolving many of the problems dogging the economy: A reliance on commodity exports, heavy indebtedness to the rest of the world and a sharemarket that lags its international peers.

But the brothers have not let their success go to their heads. It is the tail end of the Christmas break. Brent Robinson has just flown in from Great Barrier Island, cutting into his holiday especially for the interview with the Business Herald.

However, sitting in the beige boardroom of Rakon's Mt Wellington headquarters, neither cuts the corporate image - open-necked shirts, tanned, taciturn and still betraying traces of the roll-up-your-sleeves ethic that has propelled Rakon to where it is.

Brent Robinson, 46, who started as an electronics apprentice with the now-departed Pye electronics company in Waihi before joining the family firm in 1979, contrasts Rakon's new governance regime with its past.

Rakon has just appointed two independent directors, including chairman Bryan Mogridge, a director of Mainfreight and Pyne Gould Corp, and for the first time is holding regular board meetings.

"As we have grown over the years, we have just huddled in one of our offices - regularly," says Brent Robinson. "If we are going to raise capital and are looking at an initial public offering [the new governance regime] is necessary. Certainly, the company is at the stage where it needs those strict disciplines."

Their father, Warren, who trained in electronics with the former Broadcasting Corp and stepped aside as chairman for Mogridge, still sits on the Rakon board and remains an important sounding board for the brothers.

Rakon has not committed to listing, but it is understood to have engaged investment bank UBS to advise it on strategic alternatives. Another possibility is bringing more private equity into the business. Last year, Rakon sold 20 per cent to Peter Maire, founder of the successful hand-held GPS-maker Navman.

"We will make up our mind in the first quarter," says Brent Robinson. "We need to make a decision to move the company forward. We cannot stagnate."

Rakon's growth has largely been funded by retained earnings. But the Robinson brothers are confident demand for GPS receivers is about to surge. Such navigation equipment is the standard fare of luxury cars such as Mercedes-Benz and BMW and, if history is any guide, it will eventually filter down to the shopping-trolley end of the market.

Meanwhile, for years mobile phone companies have been talking about how GPS devices will be standard kit. They are eyeing lucrative opportunities such as sending adverts to phones if, for instance, they know a user is standing outside Noel Leemings or Harvey Norman.

"We are facing quite a lot of growth and we are reaching a point where it's accelerating beyond the means of the company," says 44-year-old Darren.

Rakon will not say just how much it wants to raise nor its value, but it wants to expand its sales and marketing presence and production capacity at its Mt Wellington headquarters by 70 per cent.

If all goes well, the plan could mean as many as 30 new jobs at Mt Wellington, where Rakon already employs 500 people.

The brothers, who own an 8 per cent stake each in their own names, do not have a preference for private equity over a public offer. But they are determined Rakon should remain independent. "We certainly are," says Brent Robinson. "We believe we have a bright future ... and there is no point selling out at the beginning of a large growth curve."

Darren Robinson continues: "The automotive market has been a strong market for us and will continue to be. But then the cellular phone market is looking at 500 million to 600 million cellular phones manufactured this year.

"It's a matter of if and when GPS saturates into that market. We are preparing for that and want to be part of that growth curve."

They also say that if the company decides to float it will float in New Zealand rather than overseas - news which will please the NZX, which lost several companies last year.

"We feel the New Zealand market has the potential to offer us what we are looking for," says Brent Robinson. "Darren and I went up to the United Kingdom to look at the market opportunities up there last year. It's easier to manage here and we think the NZX is large enough for a company of our size."

Rakon's rise was occasionally haphazard. Its big break into the United States in the early 1990s came about almost by chance. Darren, who had just joined the company, spotted a magazine advertisement placed by US manufacturing giant Magellan Systems, which was looking for companies to manufacture GPS receivers.

They got on the phone and found out they were making exactly what Magellan was looking for. Magellan and later rival GPS-maker Rockwell began ordering large volumes.

Contrary to the conventional wisdom, the brothers say New Zealand's small size and its distance from international markets was a key factor in Rakon's success.

Brent Robinson said: "We were a small company that did not have the capital to purchase the test equipment so we designed and built it ourselves, and that gave it a unique flavour and that gave us the capability to produce a product ahead of the competitor.

Darren Robinson said: "We were able to do things differently. In Japan, all the major manufacturers tended to be using the same type of machines, the same type of technology. We were relatively isolated down here, so we developed some processes and know how that was different to the mainstream."

Although New Zealand is near the bottom of the world, the country still has advantages, particularly over European competitors. For instance, its position on the Pacific Rim allows the country to deal with US customers just as they are leaving for the day and Asian customers as they are getting up.

"We cover half the globe on timing and that is really where all the activity is. It is around the Pacific Rim," says Darren Robinson.

They believe their story need not be a one-off. "I think there is a model for technology businesses to identify opportunities that are niche, that have the potential to grow and that have problems that need solving," says Brent Robinson. "I think New Zealanders are good at problem solving. That is what we did, we solved a lot of problems that other manufacturers had not."

The brothers are enjoying the ride and although the question of how to fund future growth is not resolved, they say they only want more time in the day.

"We find it quite exciting; it's all new and challenging," Brent Robinson says. "When I took over in 1986, sales were under $1 million and, in Auckland, we had 12 staff and we were making 2000 crystal units a month. It has been quite a volatile rise.

"It's been a family business and that has made it that much more special."


Brent Robinson CV

Rakon managing director.
Age 46.
Married to Lisa.
Children: Two boys, aged 19 and 20.
Education: St Kentigerns College, Pakuranga. Pye electronics apprenticeship.
1979: Joined Rakon.
1986: Appointed managing director.


Darren Robinson CV

Rakon marketing director.
Age 44.
Married to Felicity.
Children: Two boys and two girls, aged 4 to 18.
Education: St Kentigerns College, Pakuranga. Diploma in Export Marketing (Melbourne).
1983: Joined Rakon's Australian computer venture.
1990: Joined his brother at Rakon in Auckland as marketing director.