Smith & Wesson Is Fighting Its Way Back

[USMCRET6391]

SPRINGFIELD, Mass. — It is hard to imagine a company sinking as low as Smith & Wesson, the legendary arms maker that equipped soldiers from the Civil War to Vietnam and 98 percent of American police forces.

Just two years ago, the company's chairman was found to be a convicted felon: he had failed to disclose spending 15 years in jail for armed robbery. Federal investigators were looking into accounting irregularities, and the company's stock was stuck at $1.50 a share.

Adding to the company's woes, American soldiers for the last decade have carried Italian-made Berettas, while most police forces long ago switched to handguns from Glock, an Austrian company.

But now, with new owners and a new chief executive, Michael P. Golden, who once sold power tools for Black & Decker and bathroom fixtures for Kohler, Smith & Wesson is coming back to life — thanks to an expanding Pentagon budget and growing spending by the Homeland Security Department.

With consumer sales of rifles, shotguns and handguns remaining flat for the last decade, Smith & Wesson is casting its lot with Washington, where it is making headway with a new "Buy America" pitch in Congress and at the Pentagon.

The company recently won contracts to supply pistols to the fledgling Afghan security forces, its first Pentagon award in 15 years. Next, it wants to put a Smith & Wesson back into every American soldier's hand — a major contract worth up to $600 million.

Smith & Wesson was not the only American gun maker whose fortunes fell in recent years. Just last month, in nearby New Haven, the Winchester firearms factory — where the "gun that won the West" was made for 150 years — closed its doors. Another neighbor, Colt's Manufacturing, is a shadow of its former self and is now known mainly for a single product, M-16's, that it sells to the Pentagon.

But Smith & Wesson fell more drastically than the others, mainly because of its agreement in 2000 to adopt gun safety measures to settle lawsuits brought by state and federal agencies. That Clinton-era accord resulted in a boycott by the National Rifle Association and made Smith & Wesson an industry outcast.

The mood in Washington has changed since then, and to the company's advantage. A gun-friendly administration as well as a new law signed last fall by President Bush — the Protection of Lawful Commerce in Arms act — that shields gun makers from lawsuits has undercut the opponents of guns.

Lawsuits against gun makers have largely been tossed out of court, and the end of a 10-year ban on assault weapons is encouraging the gun industry to make new, more powerful weapons, with higher price tags.

"This is a 154-year-old legacy brand that everyone knows and likes," said Mr. Golden, 51, in an interview in his office here decorated with memorabilia of sharpshooters and historic firearms. "But we had no sales to the federal government. Zero. None. We had no representatives in Washington. No lobbying firms.

"We are a gun company," Mr. Golden added. "The country is at war. We had no one in Washington looking out for our legislative issues or trying to get procurements. It blew my mind. Smith & Wesson means a lot. It stands for Americana."

For help in Washington, the company hired the lobbying firm of Greenberg Traurig, where the disgraced lobbyist Jack Abramoff once worked, and paid it $120,000 in the second half of 2005, according to PoliticalMoneyLine, an independent campaign finance Web site. And Mr. Golden and Smith & Wesson executives began calling on lawmakers themselves, pressing the case for buying American firearms.

"I'm amazed how easy it is to get audiences with key members of the House and Senate and the agencies," Mr. Golden said. "They always say, 'Where have you guys been? We haven't seen you in years.' "

For the last decade, some three million to four million guns of all types — rifles, shotguns and handguns — have been sold annually in the United States, with sales estimated at about $1.4 billion a year.

This lack of growth reflects a diminished appetite for sport hunting. In addition, the durable nature of guns means that although gun owners may want the latest model, they do not necessarily need to buy one.

In the meantime, the federal budget for small arms continues to grow, not only for American soldiers and other government agents, but also for Iraqi and Afghan government forces.

"The government is the only business that is expanding," said Joshua Horwitz, executive director of the Coalition to Stop Gun Violence, based in Washington. "The civilian market is not, while the government is putting tens of billions of dollars into homeland security."

It remains to be seen whether Smith & Wesson's improving fortunes are a one-time blip or the beginning of a longer trend.

The $20 million contract to arm Afghan police officers, soldiers and border guards was awarded to Smith & Wesson in four pieces, starting last year. It calls for Afghan forces to receive more than 22,500 pistols, the model SW9VE, a 9-millimeter double-action semiautomatic.

Michael Golden became chief executive of Smith & Wesson less than two years ago. In a departure for the company, he has visited Washington to press the idea that the Pentagon should buy American-made guns.

Next year, the Pentagon will be deciding on a new 10-year contract to provide 645,000 sidearms for the military to replace its Beretta models. With up to $600 million at stake, Smith & Wesson wants to be in the running — perhaps, suggests Mr. Golden, even working with the Pentagon to develop a next-generation pistol.

"The big push by Smith & Wesson is that contracts should go to a U.S. manufacturer," said Eric Wold, an industry analyst with Merriman Curhan Ford, a San Francisco brokerage firm. "And you can't get more American than Smith & Wesson."

Smith & Wesson is also one of four companies — the other three are foreign gun makers — on the Pentagon's approved list for small-arms sales to Iraq and Afghanistan. So far, Smith & Wesson has not gotten any Iraqi contracts. Instead, the Pentagon made a contract with Glock to provide 100,000 guns to Iraqi forces.

"Glock is an Austrian company, and Austria has no soldiers in Iraq and has nothing to do with the war effort," said Mr. Golden. "But they got the contract to sell 100,000 pistols."

On the police front, Smith & Wesson lost out to Glock when the company introduced a lightweight polymer gun in the early 1980's that American manufacturers initially mocked, saying that no police officer would buy a "plastic" gun, especially a foreign one.

Last September, Smith & Wesson finally introduced its own polymer pistol, the M&P (military and police) 40 series of handguns, and is now beginning to inch back up from its current market share of 10 percent.

On top of that, a shrewd marketing campaign has put the Smith & Wesson name on everything from Nascar racers to a shooting-and-hunting cable show on the Men's Channel. And it now adorns a new men's cologne — introduced in an event at the Miami Beach estate once owned by Gianni Versace (the company made clear it was not a Smith & Wesson gun that was used to kill Mr. Versace).

"No company in modern history has come back from the dead like Smith & Wesson," said Russ Thurman, editor of Shooting Magazine, a leading trade publication. "In the dark days for Smith & Wesson, you'd go to a trade show and there would be an invisible cone of silence around the Smith & Wesson booth. Now you have to get into a fistfight to get close to their displays."

Smith & Wesson was founded in 1852 when Horace Smith and Daniel B. Wesson introduced a pistol to replace the muzzle-loaded rifle. In 1987 it was purchased by Tomkins of London for $112.5 million; the new owner later invested $60 million to upgrade the factory here.

When Tomkins sold the company in May 2001, it received only $15 million. The buyer was an American investor group that took the company public and now holds 25 percent.

While the company is best known for its manufacturing heritage, Mr. Golden has stressed marketing in his hiring of a new management team from Coca-Cola, Frito Lay, Ingersoll-Rand and Harley-Davidson as well as from its rival Glock.

During the last two years, the company's stock has risen to $6.25 a share, from $1.50. Revenue rose to $124 million in the 2005 fiscal year, which ended last April 30, from $118 million in 2004. Meanwhile, profit climbed to $5.2 million, from $800,000 a year earlier.

The shifting political climate allowed for the lapse of a 10-year ban on assault weapons and has encouraged the industry to come up with new assault-style weapons that are attracting a lot of attention.

One of Smith & Wesson's most successful new products is the X-treme Velocity Revolver .460, which is not an assault weapon but is billed as "three times more powerful" than the Smith & Wesson .44 Magnum used by Clint Eastwood in the "Dirty Harry" movies. Its bullets can travel at 2,300 feet a second, or twice the speed of sound.

"Repealing the assault weapon bans opened a new market for military-style and exotic weapons for consumers," said Robert A. Ricker, executive director of the American Hunters and Shooters Association, a membership group. "A lot of guys delight in having the biggest and most nasty-looking guns. That's one of the industry trends."

The company has also come up with a single-shot rifle that is the law enforcement version of a military assault-style weapon. The rifle, the M&P15, is popular with police departments as an alternative to pump shotguns.

For Mr. Golden, selling guns is a big change. "It's a little more action than when I was working at Kohler," he said during a recent analysts' conference call, "when we were selling toilets."

[Covertness]

"But Smith & Wesson fell more drastically than the others, mainly because of its agreement in 2000 to adopt gun safety measures to settle lawsuits brought by state and federal agencies. That Clinton-era accord resulted in a boycott by the National Rifle Association and made Smith & Wesson an industry outcast."

Some of us are still holding to that boycott. S & W has a lot more to do for me to get behind them.

[RR691983]

Originally Posted by Covertness

"But Smith & Wesson fell more drastically than the others, mainly because of its agreement in 2000 to adopt gun safety measures to settle lawsuits brought by state and federal agencies. That Clinton-era accord resulted in a boycott by the National Rifle Association and made Smith & Wesson an industry outcast."

Some of us are still holding to that boycott. S & W has a lot more to do for me to get behind them.

I second that.

[66MP1]

I have always preferred S&W to other weapons until I got my H&K USP .45, after that it was all over.