ROCKSHOX: CYCLING'S EASY RIDERS
Tucked in a Silicon Valley industrial park, RockShox Inc. could be another ultrahip Internet provider. But the parking lot, where an employee test-drives a mountain bike, makes clear that this is a local success story with a difference. The speed bumps that line the lot are a product-development tool.
RockShox makes high-end bike components such as front-suspension forks, one of the hottest products in mountain biking. In eight years, the San Jose (Calif.)-based company has become the world leader in bike suspension--bouncing to No.17 on BUSINESS WEEK's Hot Growth list. For the fiscal year ending in March, pro forma earnings rose 37%, to $14.2 million, on sales up 27%, to $106 million.
RockShox' story is the envy of giants. Paul Turner, 37, and Stephen W. Simons, 42, were teenage friends who loved motorcycles. Turner worked for Honda R&D North America Inc., and Simons started a motorcycle-parts business. In the late 1980s, Turner tried mountain biking and was astonished by the teeth-chattering jolts he suffered. So he built a shock absorber in his garage--an ''ugly thing drooling oil,'' says Simons, who soon teamed up with his pal. With Simons taking the CEO's slot and Turner focused on developing technology, their break came in 1990, when the winner of the tony NORBA Nationals race rode a RockShox fork.
The product became a must for serious gearheads and quickly attracted rivals. But through Turner's marketing hustle--he won endorsements from top racers and produced slick graffiti-based ads--and Simons' focus on manufacturing, they've outflanked big bike makers. Focusing on their own brand, they also resisted pressure from the big guys to make private-label shocks. With odd product names like Indy and Sid, RockShox developed a ''cult following,'' says Jackson Lynch, a spokesman for Wisconsin-based Trek Bicycle Corp. ''People ask for bikes with RockShox forks. Their name is incredible.''
Today, RockShox supplies about 60% of all bike suspensions, which are featured on just 17% of mountain bikes, mostly those priced above $650. Two-thirds of sales are to bike makers like Trek and GT Bicycles Inc. RockShox also sells components through bike dealers, and about 60% of sales come from abroad. David L. Rose of Los Angeles-based brokerage firm Jefferies & Co. expects 1998 sales to rise 18%, with earnings up another 16.5%, to $16.5 million.
''CUTTING METAL.'' So far, though, RockShox' investors' ride has been a bit too smooth. Since it went public last September, the company's stock has hovered near its initial public offering price of $15. Simons realizes RockShox likely will never match his cyber neighbors' multiples. ''We're a Rust Belt kind of company,'' he laughs. ''We're cutting metal.'' But he'll borrow from them where he can: Forks in his San Jose plant spin off an assembly line he bought from Steve P. Jobs's now-defunct NeXT Software Inc. plant for a few dimes on the dollar.
To boost growth, RockShox is moving into road bikes and disc brakes, trying to build market share for its rear-suspension forks, and slowly expanding into cycling clothing. Simons also wants to lower manufacturing costs so that he can put suspensions on bikes in the $400 to $600 range, too. Now, RockShox must appeal to those who are simply smoothing the trip to the local latte parlor--without diluting its magical name.
By Joan O'C. Hamilton in San Jose, Calif.
Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.