June 23, 1998

Nike leads list of top 20 Oregon companies

PORTLAND, Ore. (AP) -- Despite collapsing sales, layoffs, executive resignations, disappointing new ads and criticism over shoe-factory working conditions, Nike Inc. is still the biggest corporate name in Oregon and a long-term bet of stock market analysts.

The Beaverton-based athletic shoe and clothing maker easily led the top 20 list of Oregon companies ranked by sales in 1997.

But the No. 3 company in annual revenue, Fred Meyer Inc., far outstripped Nike in terms of employees, with 88,000 worldwide compared to 23,606 for Nike, according to figures compiled by The Oregonian.

The newspaper said the fastest-growing companies in terms of sales were an aerospace metal and parts manufacturer, a hydraulic equipment maker, and the nation's second-largest video chain, in that order: Precision Castparts Corp., Cascade Corp. and Hollywood Entertainment Corp.

Tektronix Inc. held onto its No. 1 spot as the largest Oregon high-tech company in terms of sales, followed by Sequent Computer Systems Inc. and Mentor Graphics.

Willamette Industries Inc. was the largest forest products company and Wilshire Financial Services Corp. took over the top financial industry ranking after Portland-based U.S. Bancorp was sold to a Minneapolis bank earlier this year.

Despite a difficult fiscal year for Nike that ended in May, ending with an evacuation of employees from riot-torn Indonesia, Robert Sanborn is confident about the company.

Sanborn is portfolio manager of The Oakmark Fund, a Chicago-based mutual fund with about $9 billion in total assets. Since late fall 1997, he's invested more than $500 million of his investors' money in Nike. Oakmark now owns about 12 million shares of Nike, making it the second-largest shareholder of the company, behind only Nike Chairman Phil Knight.

"This is a great global brand," Sanborn said. "It's not Coke or Gillette. But in all honesty, it's close."

Nike already has taken some steps toward solving its problems.

The Beaverton company has managed to sell off much of its massive inventory sitting in U.S. warehouses and pare more than $300 million in expenses while retailers report new Nike products are hitting it big with consumers this spring.

Still, the coming year will be a severe test for Nike management. It must reassure a work force rattled by the layoff of 1,600 employees last winter.

The company also has lost its underdog status now that it has captured a dominant market share, shedding an image that had served it well during its growth.

"They're at a cultural crossroads," Sanborn said. "They've always been these guerrilla warriors out to vanquish their opponents. But they've won. And they've become ubiquitous."

It takes about 18 months for the typical pair of sneakers to go from preliminary design discussions to retail shelves. The sneaker companies have to place their orders with the Asian factories a good year before they get the first firm indication of sales.

Last year, the company failed to gauge the scale of the Asian crisis until late in the winter, too late to slow the glut of shoes the economic slowdown would create.

Nike also started the new year by dumping its trademark advertising slogan, "Just Do It," in favor of the gentler slogan, "I Can."

The "I Can" ads made a hit out of "Bittersweet Symphony," the pop song from a band called The Verve, that backed many of the spots. But the reaction to the ads themselves was mixed.

"It was a misguided and obvious attempt to re-create the magic," said stock analyst Michael Conn of Gruntal & Co.

By spring, the "I Can" spots had all but disappeared from the air and the advertising trade press was speculating that "Just Do It" would be resurrected.

Nike also was wrestling with fundamental issues, such as whether athlete endorsements still sell shoes and how to handle star endorser Michael Jordan's expected retirement.

Layoff rumors began to circulate before the company announced March 18 that earnings in the quarter ended Feb. 28 had declined 69 percent and sales fell 8 percent, forcing the decision to cut 1,600 jobs.

In June, Rudy Chapa, Nike's longtime vice president for sports marketing, left the company. Before he departed, Stephen Gomez, vice president for apparel, left in March. Bob Falcone, chief financial officer, left in January. Liz Dolan, former head of marketing, departed in September.

Taken collectively, the changes unsettled Wall Street.

Faye Landes of Salomon Smith Barney is skeptical that Nike can meet its own goal of 15 percent annual growth even after it emerges from the present down trend. She suggests the company must tighten cost controls in a slower-paced future.

"Nike needs to recognize that explosive revenues are not going to carry the day any more," she said.