Starting in the early 1960s, Maryland has been home to numerous custom microwave filter houses. Originally founded as small, family-oriented companies by hardworking and ambitious entrepreneurs, these start-ups saw opportunity and were hungry to seize it. Possessing the agility and inventiveness that is the hallmark of all fledgling companies that succeed in business, many of these organizations went on to become among the most famous names in the RF/microwave industry.
To get their products designed into the defense and telecommunication systems of the day, they would have to push the state-of-the-art in performance, size and cost. These young filter houses became incubators for creative filter design. Their ability to develop and, most importantly, deliver products on time and on budget surpassed the efforts of the internal filter departments of the large defense contractors that eventually became their customers.
Grooming and retaining engineering talent was critical to these smaller companies in achieving technical prowess and transforming their filter building formulas into a competitive advantage. In contrast, large defense contractors were forced to frequently replenish their expertise with less experienced employees as leading engineers followed career paths that went “up” into management or went “out” to join some promising start-up.
With a sharp and motivated worker and an environment offering the right nurturing and support, the art of filter tuning and design was developed, enhanced and passed down to the next generation. Success required one or more knowledgeable gurus, a tight group of self-motivated learners and a driven business leader with enough ‘can-do’ attitude to convince customers and his own team that they could achieve new heights in filter technology. These are some of the insights shared during a dinner conversation between Microwave Journal and two such entrepreneurs from Maryland’s rich filter history and the sons who are carrying on their legacy.
Meet the Bernsteins and the Assurians
Dick Bernstein is the legendary founder of K&L Microwave. Bernstein studied engineering at the Virginia Military Institute and earned his undergraduate degree from Salisbury State University after having gone to work as a Lead Designer for I-Tel, a filters, diplexers and multiplexers shop founded by Richard Wainwright and his wife, Virginia, in Kensington, MD. Within three years, Bernstein outgrew the opportunities available at I-Tel and followed a career path to Texscan in 1967. Texscan was a solid-state sweep generator manufacturer in Indianapolis, IN; a spin-off from a California company called Telonic, founded by two other (un-related) Wainwrights, Claire and his wife, Barbara.
In 1970, Bernstein returned to Salisbury, MD to set up his own company, named after his children Kevin and Lisa. At its helm, Bernstein grew K&L into one of the most recognized companies in our industry before selling it to Dover Corp. in 1983. Bernstein stayed on at K&L until 1989. The eternal entrepreneur left to start BAI Aerosystems, acquired Lorch Microwave in 1994 and moved that company up to Maryland. BAI Aerosystems was sold to L-3 Communications in 2004; Lorch was sold to Smiths Interconnect in 2006. His son Kevin Bernstein is the company President.
Manny Assurian has also established a global reputation as a leading businessman among the custom filter manufacturing community and their clients. In 1967, Assurian was fresh out of college from the Capitol Institute of Technology when he joined I-Tel as an engineer shortly after Bernstein’s departure. As often happens at small companies, Assurian cut his teeth by doing a little bit of everything (assembly, machine shop, tuning, etc.). In the 1970s, I-Tel changed its name to Cir-Q-Tel (see call-out box for details). During this period, Assurian’s responsibilities grew until he was serving as company President and running the business for Wainwright. Leveraging his experience, Assurian left Cir-Q-Tel to launch Reactel in January of 1979 along with former colleague, Don Claycomb.
Assurian grew his two man operation, originally located in less than 1000 square feet of manufacturing space, into a leader in the design and manufacture of high performance custom RF and microwave filters, multiplexers and multifunction assemblies. Today the company operates in a 15,000 square foot state-of-the-art facility located in Gaithersburg. Manny’s son Jim Assurian is currently the Director of Business Development at Reactel.
Itel was a San Francisco-based equipment leasing company founded in 1967. Through creative financial arrangements and investments, Itel was able to lease IBM mainframes to customers at costs below what customers would have paid IBM, making them second only to IBM in revenues from IBM mainframe leasing. Unfortunately, the name they chose for their company already belonged to a tiny microwave company in Kensington, MD. This led the much larger Itel of San Francisco to sue I-Tel of Kensington over the use of the company name.
Virginia Wainwright, who handled the business side of I-Tel went to New York and hired the most prestigious lawyers she could find. In court, the judge ruled in her favor. Recognizing the considerable costs associated with re-branding the larger company, Virginia was able to negotiate an attractive financial compensation in exchange for renaming her company. Meanwhile, Dick Wainwright envisioned a future market for drop-in circulators and thus developed such a component. The company's new name, Cir-Q-Tel was chosen to reflect its re-direction in product focus.
Steak and Shop Talk
We met in a Washington, DC restaurant, where everyone had travelled to attend the Satellite 2011 show. The Bernsteins had just returned from Dubai, where they were visiting an armaments show. Dick is currently the CEO of LWRC International, a company that designs and manufactures what the company claims to be ‘the finest evolution of the M4/M16 rifles and carbines since the weapon’s introduction.’ Using the latest technology and materials, Bernstein’s new company is able to produce rifles that operate cleaner, cooler and more reliably without sacrificing accuracy. Asked if his experience in the filter business has been applicable to his current endeavor, Bernstein replied, “Everything we’ve done has been a stepping stone in all our ventures.”
MWJ: So, why start a filter company in Salisbury, MD?
Dick Bernstein: I thought I would start the business close to my family and Salisbury had an airport. Then UPS and FedEx came along; so today, location is much less important. I tell people that unless you’re in the next town over, it doesn’t matter where you are. I’m as close to my customers in France as I would be if I were in Philadelphia or some other place. In my early ads we said, ‘just below Baltimore’ although it was over 100 miles away.
I grew up on the shore where my parents had a garment factory, so I knew the people in that industry. They were very loyal, fast learners, steady and dependable workers, which leads me to a story about one of the things I brought to the industry.
I had left the shore unable to get a job there after college and took a job [at I-Tel] on the western shore in Kensington [Maryland], followed by a few years at Texscan [Indianapolis, IN]. Texscan was making solid-state sweep generators, competing head on with Telonic, which made the old wobbleator and oscillator type sweep generators. So they needed someone to handle components, and that’s how they came to hire me.
Both I-Tel and Texscan made high mix products; those are low volume, very custom parts. In Washington, DC, I was training people that were part of a very transient labor supply. Somebody across the street would offer an employee 25 cents an hour more and they would leave. But in Indianapolis, we didn’t have that problem. We were getting very loyal people. They were unskilled, basically off the farm, but very trainable people. They reminded me of the people on the eastern shore. In the early 1970s, defense spending was winding down and engineers were losing jobs and driving taxi cabs. Texscan was cutting back, so I thought it was a good opportunity to come back to the eastern shore and start a business (Note: I-Tel and Texscan are now part of Trilithic).
So when I came back, I went to Salisbury because I knew the people [garment workers] that were available there. They were also trainable and loyal. Now in Kensington, we had high turnover. I-Tel did not believe in trying to hang on to people. You would learn and you would either get too smart, or need too much money and you were dispensable. But I believed in having continuity.
In the garment industry, what I learned is that the operator used every part of the body, their knee, their elbow, whatever it takes to run the equipment, workers are very efficient. When I went to work at I-Tel, I was amazed by how inefficient the electronic industry really was. After all, the material costs are only a small percentage of the total product and the rest of it is mostly labor. We usually had to rebuild the product two or three times to get it right, so I created some mechanization for the workers, such as hot plates to solder on and automatic wire cutters, and stuff like that. We also moved away from individually made parts and more toward a mass-production type of line with one person working on one aspect of the component and passing it along to the next person, assembly line fashion and that really improved the quality and efficiency right away.
The reason we were able to grow this industry is that we didn’t try to teach somebody how to tune and build a microwave filter; we taught them how to do one part of it. They would learn that and then they moved on to something else. We broke up the product assembly so that each aspect of the product’s construction became a simple task for entry level people to achieve and feel good about.
My competition at the time advertised in the paper for skilled technicians or specialized microwave machinists and was forced to pay higher wages. In the same paper, Frank Perdue would be advertising for chicken pluckers and gizzard trimmers. The same person who would apply at his [Perdue’s] place then would come over to apply at my place. That was the choice people had in those days; they could either pluck chickens or tune filters, and I had a cleaner operation than Perdue.
Charlie Schaub was one of my first employees. By the time I left K&L he became the President. Bob Livingston, who I hired as an accountant in 1982, is now the CEO of Dover Corp., which is now a $7 B company. Bob went to Salisbury University, and he worked for a company in Washington and then he came back, bought a restaurant and was a cook around the time I was looking for somebody to work in accounting. So when I talk about growth in Salisbury, there are lots of people who demonstrate that. Many of them were able to go far beyond what I was able to teach them.
The ‘Shoe Box’ Ad
Every entrepreneur knows that launching a company and winning initial business is not necessarily a pretty or clean endeavor. Dick recalled for us the tale of how a clever, yet somewhat over-reaching marketing campaign provided both customer and vendor with the confidence to move forward together on the development of a new filter type, helping to secure a much needed contract in K&L Microwave’s early days.
Mike Hallman, Microwave Journal: I was at K&L, working for Charlie Schaub as an intern when I heard some folklore of how you went to banks with broom handles cut up and painted black to look like filters. Is that stuff true?
Dick Bernstein: The broom part is not really correct, but I can tell you a story about that. Back in the 1970s, the market needed a tunable notch filter and there were none. Telonic was making these tunable bandpass filters and there were some engineering companies that made some other special filters, but nobody had made anything like what the market was looking for.
I had designed tunable bandpass filters as well, so I knew pretty much what the construction was. Texscan began sending me a requirement for a tunable notch filter that they were going to bid on, but they really didn’t have interest in developing it themselves. And so they ran it by me thinking it might be something I’d be interested in. This was for Harris Corp. down in Melbourne, FL, and it was all related to a program in Germany.
At the time, we [US Government] had antennas on the border of West Germany and Czechoslovakia and whatever other borders we were listening in on. In Germany, there were these high power television stations that were interfering with the ability of our listening equipment to find out what was going on over the border. So I got this requirement from Texscan for a notch band filter to block the high power television signal. I responded “no bid” because I didn’t really know how to make them.
Well, after being in business for about seven or eight months and nearly starving to death, I decided to run an advertisement in a microwave magazine for a filter based on the same specifications that I was getting from Harris. I created an ad that basically reproduced the requirements for a tunable notch filter with this frequency, performance, etc. I called it the shoe box ad. It was actually a block of wood that I painted black, I took the knob off my TV set and pasted it on as a tuner dial and stuck N-connectors on the side of it with glue and took some fuzzy pictures of it.
Well, I got another requirement from Harris and once again I ‘no bid’ it, since it was just a marketing gimmick; a way to say ‘we do these things’ to differentiate ourselves from all the other microwave guys. But the buyer calls me and asks, ‘why don’t you bid this,’ to which I said we don’t make that frequency. He replied, ‘well it’s pretty CLOSE to what you’re advertising in this magazine. Do you mind coming down here and making a presentation to our engineers? What we really want is what you’ve been advertising.’
So on the airplane heading down I literally sketched up how I would design this tunable notch filter on yellow lined paper. I arrived and three or four other engineers were already there to do a presentation. I remember there were guys from TRW and others from Hughes and they all went in and did their presentations. I went in with my yellow pad. There was a blackboard in the room and I drew up how I was going to do this thing. So they called us all back about an hour later to say they made their decision ‘and gentleman, we’re going to give the award to K&L Microwave.’
I said to the guy, ‘well I’m delighted to get this order but I thought these other guys [from TRW and Hughes] would be far more advanced,’ and the buyer said, ‘well Mr. Bernstein, this is a critical program for Harris Corp. and we can’t afford to wait and you’ve already got it made, we’ve seen the advertising.’ That’s the power of advertising!
An Angel Visits K&L
Dick Bernstein: We were just starting the business when I bid on a requirement from GTE Sylvania in Syracuse. GTE said that I was the only vendor who was fully compliant on the ten or so different items in the proposal. There were some high power stuff and some tiny stuff, but I quoted 100 percent that I could do everything they wanted in the proposal. And they called me up and told me they liked my quote but that they wanted to come out for a pre-award survey [similar to a source inspection]. At the time, I had rented this building for $75 a month; it had no heat, no air conditioning and one door. Today they would put you in jail for trying to operate out of a building like that.
Let me give you an idea of my operations back then. On weekends I would borrow Wavetek test equipment from Herb Weinstein, who was with Eastern Instrumentation, meeting him at the bay bridge on Saturday mornings, returning it on Sunday nights. This way I was able to tune filters on the weekend and it didn’t cost me anything. That’s how poor I was.
So the guy [from GTE] came in and I had my family members sitting around at tables [workstations] in the back, looking like they knew what they were doing. And we sat up front and talked. I had made up this control manual that showed how I was going to run the company. He looked through that and said it looked good, and then he said, ‘let me see the rest of your factory.’ Well the factory was essentially 1200 square feet of empty warehouse. But what I had done was put lines on the floor, marking off different spaces with tape. ‘This is where my stock room is going to be and this will be my assembly room—all marked with yellow tape on the floor, and this is my test station, my QC, this is where we’re going to do the machining, etc.’
And so we walked across this literally empty space where the floor was marked into these areas. He must have thought I was crazy. That might have taken 20 minutes to walk around and then we went back up to the front desk and he said, ‘Mr. Bernstein, this is a very, very big contract and an important contract for GTE. I don’t think we can award this contract to you. I don’t see much that you’re doing here.’
Well, he must have seen my jaw drop, because he then said, ‘On the other hand, Mr. Bernstein, I don’t see anything that you’re doing wrong. So I’m going to recommend that we approve you for this contract, but I’m going to come back in six months and I want to see this machine shop there and that stock room there.’ And so I’ve told people to this day, that everyday I went to the building, I operated as though he was going to come back to make sure that I did what I said I was going to do. And that’s been the basic principle behind our success. He never came back, but he didn’t need to. And we had many other good breaks.
While Bernstein created K&L by leveraging his experience at I-Tel and Texscan with his awareness of an untapped but trainable labor pool in Salisbury and the belief that the electronics industry could operate more efficiently, Manny Assurian leveraged his experience of running a small business with an opportunity to get his hands on the equipment needed to launch his own venture.
Manny Assurian: I had an employment contract with Cir-Q-Tel that prevented me from competing with them directly for one year. Well, I had found this guy who was selling his company. He wanted to retire and he had enough of the necessary equipment in his basement to start a filter company, but this wasn’t a filter company. So I went and talked to him and saw that he had lathes, a small mill and some test equipment. I thought— this would be perfect to do filters. So I bought all the equipment in his basement and for one year I started advertising in a local telephone book that I would do any small machining job, build cables, or anything electronic—just to survive until I could get back into the filter business.
Jim Assurian: The business Manny bought was making harnesses and boxes for the weather bureau and this gave Reactel a product to sell while they [Manny and Don] geared up for filters in 1980. I remember moving the equipment and materials from his place to our first windowless warehouse in Rockville. We bought his business because he had the rudimentary equipment that could be used to make filters (some electronic test equipment, some machine shop equipment and some assembly equipment). By no means was it the best, but it would do. Looking back on that equipment, it is laughable, but it got the job done (we do not throw anything out, it is all gathering dust in our current facility).
Manny Assurian: He was building a lot of components for certain radar markets, but they were older systems like World War II and weather radar vintage. So in 1979, we did those wire harnesses for NOAA – National Weather Service, because the equipment that we now owned and the sample materials he had sold me were for that market. He also introduced me to his contacts there, so there was some existing business, but we basically did whatever work we could find.
Then as the one year non-compete approached, I started advertising for microwave components such as semi-rigid cables, and I got a call from a company in Virginia. I think it was Atlantic Microwave. They needed a lot of semi-rigid cable and asked if I could make it. So I said ‘of course I could, I’m an expert!,’ although I had never made a cable in my life.
I went to visit them and they showed me their boards and the drawings for the cables they needed and then I noticed that they were using K&L filters. It’s almost one year after leaving I-Tel. I mentioned something about the filters in his design and I told him, ‘I can make those.’ This guy said, ‘nah, nah, nah, you can’t make these. These are very sophisticated filters.’ So I told him to ‘give me the most difficult filter that you have and I’ll make you a set.’ I went back [to Reactel], and at the time I didn’t have any test equipment that went up to that frequency. So I went to a junk house and bought a Texscan sweep generator and made this filter to the spec.
I took it to him and we hooked it up and he was impressed how well it worked. So I told him I could do the rest of them too and I got the job, which included all the K&L filters and all the semi-rigid cables that went with it. And that’s how I got back into filters, but this time with my own business. After the year was up, I placed my first advertising in MSN, Microwave System News and it said “Manny’s back,” call this number. Oh boy, and the calls I got. By 1980, we were back in the filter business and what is considered our first “official” job was a nine unit order from COMSAT totaling $1086.00.
K&L Grows and is Acquired
Dick Bernstein: We started our business in 1971, when there was a recession going on. Most companies were cutting back and dropping their advertising dollars. I was running a brand new company, and perhaps I didn’t know any better, but I kept advertising and would go out on the road to meet customers. When things eventually turned around, who did these companies remember? It was the last guy they heard from. So K&L was able to get ahead of our competitors. K&L’s growth tracked the industry and general economic ups and downs over the years, but we really outpaced everyone else in our level of growth.
When I started K&L, I was the engineer. But after awhile, I realized I could hire engineers who were a lot smarter than me. I wanted to stay close to the market and so I’d hire the right engineers. That way, I could shift my focus and run the business as a business. To do that, I brought in the people I needed to help me satisfy the customer requirements and that’s how we were able to grow.
At K&L, I liked to think of ourselves as being on the leading edge of technology, not the bleeding edge of technology, meaning that we were not trying to create new markets. We were trying to understand new markets and adapt to them. One of the reasons we looked to be part of a bigger company was to have somebody that could help us with the broader vision. And Dover as a parent company made a lot of sense for us.
Dover is a great company. The deal we made with them allowed us to continue with what we were already doing and wanted to accomplish. We were approached by several large microwave companies. The reason I liked Dover is that they weren’t in the microwave business. That told me that they needed our people to continue to grow what we had already started. And that made our people feel more secure.
K&L Sprouts Several Start-ups: Salisbury Engineering and Filtronic Comtek
MWJ: Tell us about Wayne Barbely and Salisbury Engineering.
Dick Bernstein: Wayne Barbely was working at Wallops Island [Command and Data Acquisition Station] out of NOAA. Wayne was a very good engineer. At the time we were building varactor tuned filters and we had hired Wayne and another engineer to work on these. Back then we had to get our production out of the way to meet our payroll and cash flow. So the way I worked the company was to take the first two or three days of the week and have everyone working on achieving that goal. Then after that, engineers could work on new projects and developing stuff. We needed Wayne to get stuff out the door. He didn’t like that approach, so eventually he left and started Salisbury Engineering. Wayne wanted to get into what we were doing, but in his own way. So Salisbury Engineering was founded; that was in 1983. We had other people who had left to start businesses in California, but he was the first person to leave K&L to start something new in Maryland.
Wayne ran a different type of company than I did. I think there are essentially two types of companies. I try to grow the business and in doing that I bring up other people and eventually they replace me and that’s how we grow. This was something I recognized was missing when I worked for Wainwright, which meant I could only go so far at I-Tel. Manny saw that as well, which is why he eventually left. The only way you can grow is to leave, unless you are happy with your position in that company. Likewise, Wayne wasn’t happy with our approach at K&L and left to do things his way. Salisbury’s approach was for management to maintain strong control of sales and engineering. This worked well for Wayne.
MWJ: Well, there are a lot of companies in our industry that are happy with being a certain size. They make good profit year after year and they don’t want to mess up the formula.
Dick Bernstein: That’s true, and it works for some people. I prefer to have the challenges that come with trying to grow a business than the challenges of trying to maintain a certain size. In the end, Salisbury’s strategy worked for them.
Carl Sheffres, Microwave Journal: Wayne told me he never wanted it to get too big. He figured out what he needed to do to make about the same amount of money every year.
According to public record, Salisbury Engineering earned approximately $4 M in 2004, the year they were acquired by Spectrum Control.
MWJ: Spectrum bought two companies with Maryland produced filter roots: Salisbury Engineering in Salisbury and FSY in Columbia. And API Technologies just acquired Spectrum Control for about $270 M. But going back to the topic of K&L spin-offs, how did Comtek come about?
Dick Bernstein: Dr. David Chambers worked for Professor Rhodes of Filtronics in the UK. Rhodes was a pure genius who approached everything from a theoretical perspective, including business. He would visit me at the shows and congratulate me. He would ask ‘how do you guys do this stuff.’ That is, being so well known in the filter business without many engineers or PhDs. I told him that our approach is based on the belief that ultimately, the low cost producer was going to win. The competition was no longer just across the street or across the state but all over the world, and our job was to take customers orders and deliver the product in the shortest time possible at the lowest possible cost. Well, Professor Rhodes had a different philosophy. He was able to go beyond the filter and integrate these complete systems.
In the mid-1980s David Chambers joined K&L as our Senior Engineer and helped take us to the next level. He’s what I call an engineers’ engineer. All of a sudden my other engineers could learn from him. We had been using University of Maryland professors to come in and teach some microwave networks theory, but when he (Chambers) came on board everyone gravitated toward him. He became their mentor.
And Dave used to tell me that it was amazing what we were able to accomplish with so few engineers, which he meant to be a compliment. And I would kid him back by saying that’s why we had been so successful. But he understood where I was coming from, and he did help us get to the next level, handling the more sophisticated stuff as our market grew from production oriented to more engineering oriented. And this was from 1983 through the early 1990s. David stayed with me through that period of time, and then when I left the company there was a change in management.
The Commercial Wireless Explosion
Kevin Bernstein: You have to understand what was happening at the time. K&L was positioned squarely in the defense market and we would see these requirements for ridiculous quantities at ridiculously low prices and our natural reaction was ‘impossible.’ Rhodes understood what was happening and believed in it. Prices were just dropping. Things we would sell for $800 to $1,000, people were demanding $300 or $400. We would tell them no way, but they would tell us they were getting it from a new type of supplier.
Dick Bernstein: At that time our business was 90 percent defense, small quantity high mix of products. The cellular business represented high quantity, low mix products. And that was something we didn’t see coming. It was a more sophisticated kind of product. Filtronics filled that void; they were focused on that kind of market.
Kevin Bernstein: When you look at how Comtek started in Salisbury, it was really a combination of some personalities, and market changes. Rhodes knew it was time to invest in the commercial business and David lived in Salisbury, and he was a visionary and knew where the business was headed. Rhodes also knew which way it was heading. For practical guys like us, we would say there’s no way that’s going to happen.
Jim Assurian: I couldn’t believe how big they were, they were huge. At the time, we were both using the same silver plater. Reactel would have a hot job and I’d drop off a handful of units when this truck from Filtronic Comtek would back in. They began unloading pallets, while I’ve got a box of about five cavity filters that I needed right away and I was going to wait for them to be plated. It was a go-go time for those guys.
Kevin Bernstein: Same for us. They would get some parts machined at the same machine shop that we used. I’d go in there and they would have all the machines dedicated to Comtek and they weren’t interested in doing our stuff. I was having trouble using our own machine shop. It came about because they had a vision of the market that wasn’t understood at the traditional defense businesses.
In 1994, demand for the company’s filters used in cellular base stations was booming. Filtronic Comtek, a division of Filtronic Comtek PLC England, had 110 employees on the Eastern Shore and expected to add another 200 after the construction of their 62,500-square-foot, $4 M headquarters and manufacturing center in Salisbury.
Dick Bernstein: Professor Rhodes bought one or two companies, he bought a circulator company, had a company up in Scotland, a foundry that made their integrated circuits, and they were publicly financed in the UK. I remember meeting some of the board members; they didn’t have much tolerance for losing money. But they had fantastic growth.
Manny Assurian: At that time [early 1990s] the commercial market really took off. They were selling stuff for much less and we would scratch our heads trying to figure out how they did that. And that’s when I came up with the idea to see if I could get my labor costs down since the most money that you spend on a filter is the manual labor for tuning. So I figured if I can get it to the point where anybody could come in here and learn this skill in a week, I could get lower wage earners. So we developed a methodology to tune filters and I was able to reduce my labor costs.
Dick Bernstein: In the defense market the customer pays for the R&D, so you get a higher mark up because your costs are higher. In the commercial business you have to go with the 1000 piece price that is set by the market. So you’re taking all the development cost on your chin and you’re at risk. And what happens when they do that? Well, take a look at everything that’s going on in the commercial business. Where is it being done today? It’s being done offshore and they’re chasing lower labor dollars constantly. So that’s what happened to Comtek. Eventually it went off to China, because that’s the big market. And you have to be in China today to satisfy that cellular business.
Manny Assurian: Even K&L went to China [under Motorola’s insistence], but they didn’t do very well. But then it was all based on Motorola business. Later, I was congratulating K&L at one of the shows and they told me that they had to shut it down. Although they were making the parts there, they needed them at a Chinese price. The price had dropped from $400 a unit down to $150 a piece. And there was no way they could do that, so they had to shut it down.
MWJ: So Dick, you mentioned leaving K&L, which eventually got you connected with Lorch. What’s the story behind Joe Lorch and Lorch Microwave? What got you interested in purchasing them and returning to the filter business?
Kevin Bernstein: Joe came out of Empire Devices and started Lorch Electronics in the mid 1960s.
Manny Assurian: They didn’t make filters; they were doing lots of combiners and loads.
Kevin Bernstein: Well, Joe did whatever was interesting to Joe. What I saw there were lots of mixers and phase shifters, IQ modulators, some filters but transformers as well. Early Lorch catalogs had everything under the sun. Joe sold the company around 1983 or 1984 to Vernitron, who moved it from New Jersey to the St. Petersburg [Florida] area and the company kept getting smaller and smaller and then they eventually sold it to Dad. That’s when we moved it back up to Salisbury and we changed its focus to filters.
Dick Bernstein: I left K&L in the early 1990s and at that time my turn-over rate for people was extremely low. And when the new management came in, they began to cut back and replace people, so there were a lot of people on the street that had filter knowledge.
When I left K&L, I actually started a new company called BAI Aerosystems [BAI was later acquired by L-3 Communications in 2004]. We made Unmanned Aerial Vehicles (UAV) or drones. This company that I had just acquired only made airframes. They weren’t making autopilots or guidance systems or anything like that. I thought we could make transmitters and receivers for a complete UAV guidance system using people who had knowledge in telemetry. So we started hiring these people who were out on the street. The job market was soft but their background [filter experience] was strong.
Meanwhile, K&L was laying off and people were looking for jobs, and I was approached by a business group to look at Lorch Microwave. They needed someone with knowledge of the products to step in and help them fulfill their contracts.
Lorch Electronics in Florida had taken this product line, and was struggling due to lack of continuity of key personnel from the original company in New Jersey. They tried many manufacturing models, including off-shore manufacturing, but they were unable to consistently maintain the expected quality levels. To this day, in microwaves you can’t rely on the last build, because there are always some subtle differences in components. You need that guy (the technician) with the knowledge to figure out what the differences are in order to tweak it properly. I said I could acquire Lorch, but that I would have to move them to Salisbury where we were familiar with the available talent.
I looked at it, they made me a sweetheart deal, and so I acquired the company and moved it to Salisbury. We turned it into a great little company because I needed those products for the airplane business. It was there to support the electronic side of the airplane business. My non-compete with K&L was for five years. Lorch was acquired in 1994 and I had left K&L in 1989, so five years later I was able to acquire them and re-enter the filter business but with a different focus and objective. We relocated Lorch to Salisbury with about 10 employees.
Lorch Microwave is now part of Smiths Interconnect, which designs and manufactures RF components for the wireless telecommunications, aerospace, defense, space, medical, rail, test and industrial markets. From the Bernsteins’ perspective, Smiths has been a great parent as the business has been able to maintain its traditional management philosophies, yet has the strength and support of a much larger global organization.
The Maryland Filter Legacy
Kevin Bernstein: In Salisbury, the two big spin-offs were Salisbury Engineering and Comtek, but there were all kinds of permutations after that. You had people that were at K&L that went to Comtek, and then we brought Lorch into Salisbury, so people were going from K&L to Lorch. People like Gary Ennis left K&L and Lee Mason left Filtronic and started ClearComm in 1997. ClearComm saw a niche in the market among the 2nd and 3rd tier carriers for orders of less than 1,000 parts that K&L or Comtek weren’t interested in supplying. So they started knocking on doors and were able to establish a business there.
There was also RelComm. That’s the company that John Tinkler started after he left K&L. In 1993, K&L acquired the switch line from Transco in Camarillo, CA. RelComm Technologies was established in April 1994 in Salisbury. RelComm designs and manufactures custom (design enhanced application specific) RF coaxial relays for telecom infrastructure, MILCOM systems as well as test instruments. In 1996 Dow-Key was acquired by K&L Microwave/Transco under the umbrella of Dover Technologies. Dover felt that Dow-Key had the stronger position in the switch market and all production was moved to Ventura, CA.
There is also Eastern Wireless Telecom (EWT) that was spun off from Lorch in 2000 by my cousins, Kerry and Bryan Bernstein. EWT specializes in custom filters and filter based products for military, commercial, wireless and space applications. All those people worked at K&L at some point. Cir-Q-Tel and Reactel also spawned their share of spin-offs.
Manny Assurian: In 1983, three people (Bill Forrestel, Roland Siushansian and John Yania) who I hired during my time at Cir-Q-Tel (and two of whom worked for us a little at Reactel) left to start FSY Microwave as a company that designed and manufactured filters and multiplexers. Neither Bill, John or Roland were involved in electronics at all when I first hired them at Cir-Q-Tel, but eventually they all moved through the ranks to the point that they decided to go out on their own. FSY eventually got bought by Spectrum Microwave (Siushansian is retired, Yania still works for Spectrum as a Business Development Manager, and Forrestel now works for Aeroflex Weinschel in Frederick, MD as the Director of Subsystems Engineering). While one could debate whether FSY was truly a spin-off from Reactel, our first “official” spin-off was ES Microwave.
Spectrum Microwave originally evolved under the direction of Spectrum Control’s CEO Richard Southworth, leveraging their expertise in RF and microwave ceramic filter and antenna technologies. The division’s initial strategic acquisitions in 2002 were FSY Microwave and Salisbury Engineering; both companies were leaders in their own right. In July 2002 Spectrum paid $6.5 M to pick up FSY Microwave Inc. At the time it was purchased the production and R&D facilities in Columbia, MD totaled 45,000 square feet.
My nephew Sargon Assurian and a technician we had at Reactel left to start Eastern Multiplexers in 1991. In 1996, that same nephew left EM and together we started ES Microwave. ES Microwave concentrates mainly on suspended substrate filters, multiplexers and switched filter banks.
Market Drivers Today
MWJ: It seems that certain events come along over time and propel the industry forward, such as radar in World War II, the Cold War, Vietnam War, weather radar, NASA, commercial telecom and wireless communications. And that pushes the need for smaller, lighter and less expensive solutions. So looking at where we are today, what do you see pushing the industry forward?
Dick Bernstein: When this country was building its [telecommunications] infrastructure, they were digging trenches and laying cables underneath the ocean. Now anybody in Indonesia or Somalia has a cell phone and they need their own infrastructure. That’s where the future market is going to be. That’s what Professor Rhodes did so well, and so he set his company up as an integrator and created a new type of filter company. But the cost needs to be so cheap today compared to what it was, and that is where the challenges are. I also think you’re going to see the next big opportunity in automotive, where you’ll have tracking and cars will be another mobile wireless device and people will get their e-mails on the dashboard and have full access to the Internet.
MWJ: Hopefully the driver is watching the road. But, what you are describing sounds like a high volume, cost driven market. Has Maryland become the center of the universe for custom microwave parts and does chasing that business restrict growth for such companies?
Kevin Bernstein: It doesn’t restrict our growth when it comes to the defense market, but it definitely restricts our growth in telecommunications. And the two markets don’t really converge; we don’t see custom parts working their way into high volume markets.
MWJ: It seemed like years ago, businesses could cycle back and forth between the defense or commercial markets based on whichever one was stronger at a given time. Eventually companies seemed to have settled into serving one or the other markets.
If those markets don’t converge, do you ever see custom shops shifting back from defense to commercial markets in the future?
Jim Assurian: You can’t put a square peg into a round hole. We may not have a period of phenomenal growth like a high volume, commercial based business would, but few of those guys are making money these days. We have steady growth. We have been around for 32 years and have seen all business cycles and we’re still here. People will always need what we provide. We also don’t have a problem with a part becoming obsolete. We have buyers come up to us with old catalogs and we’re able to supply them with old parts because we have all the old drawings, the bill of materials and the know-how.
People do come up to us and ask, ‘what new things are we presenting to the market?’ But we’re more driven by the market. We respond to market needs, such as making a smaller filter or using a different type of connector. Someone comes to us with a unique requirement and we’re going to develop something explicitly for him, but he’s going to be the only guy who needs that part and he’ll be the only guy we sell that part to and he’ll come back to us for as long as he needs that part. That’s the custom business. Therefore, I think there’s always going to be the need for the custom guys.
Manny Assurian: Just the other day I got a call from a buyer. They wanted to know if a certain part was still available. I told him of course it is. I understand why he would ask this question. If you look around, a lot of these companies have disappeared. Maybe because we make these simple boxes, although they are not simple inside, but we are reacting to what our customers tell us they need. So our customers, the system integrators may see larger trends, but it’s hard to decipher what direction the market is headed or what the next big thing will be based on our vantage point.
Kevin Bernstein: In the commercial telecom products, every OEM has the same electrical requirements, but people approach the problem in their own way, integrating different parts, optimizing the amplifier or the filter depending on their strengths and expertise. They all have their own formulas and there are infinite ways to address a need. And even with so-called standard parts, there still seems to be the need for a nearly limitless number of components built to infinite configurations, combinations of frequency bandwidths, connector types, etc. So that represents a relatively small but steady market and we’re happy to fill that niche.
When customers talk about obsolescence, there’s no such thing for us. We can make the same parts that we made 40 years ago. No problem.
You Can’t Tune a Fish
What Bernstein started in 1971 with K&L Microwave, today represents a community of more than 1,800 workers in Salisbury. In recognition, he has been awarded honorary doctorates from both the University of Maryland and Salisbury State University. Along with Manny Assurian, who extended the state’s filter expertise with Reactel and the handful of spin-offs that he has inspired, these entrepreneurs are responsible for some remarkable accomplishments. Thanks to K&L Microwave’s impact on the region, the industrial base of Maryland’s Eastern Shore now contributes more than $200 M aggregately to the local economy. To mix metaphors – You can give a man a fish and he will eat for a day, but teach him how to tune a filter and he just might be able to buy fish for a lifetime.