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Long Island's business world gets smaller

BY TOM INCANTALUPO | Newsday Staff Writer

The face of Long Island business continues to evolve, a result of world and national economic trends and the costliness of doing business here. Fewer local companies are publicly traded now than in recent memory.

The changes carry pluses and minuses for workers and consumers, says chief economist Pearl Kamer of the Long Island Association, a business group. A larger company is likely to provide better benefits than a smaller one, she says. And a private company that doesn't have to answer to outside shareholders might be more generous with wages. "If you want to give your workers a raise to keep them happy and make them more productive, you can do so," Kamer said.

One possible downside, though, is that a private company can keep many more secrets than a public one, which is subject to Securities and Exchange Commission disclosure rules.

But switching from public to private is only one of four reasons why the number of Long Island public companies has dwindled from at least 165 in 1997 to a little more than 100 this year. Many companies were swallowed up in acquisitions. Some moved away from Long Island and others went out of business.

Acquired

To put things in perspective, Kamer noted that Long Island never had as many large public employers as did New York City -- or even some suburbs, such as Westchester County. "We never had a lot, and any that we had were related to aerospace," she said.

The biggest was Grumman Corp., a publicly traded company that for years was Long Island's largest non-governmental employer. The takeover in 1994 by California-based Northrop Corp. was a way of eliminating a competitor for what were then becoming scarcer defense dollars.

Grumman is still here -- a shadow of its former self -- but it's part of Northrop Grumman now, its headquarters are in Los Angeles, and so it's off the list of Long Island-based publicly traded companies.

Merger mania, a worldwide phenomenon fueled since the 1980s by cheap money, brought the acquisition of 12 Long Island public companies since 2000. They included household names like Avis (formerly of Garden City), Noodle Kidoodle, the Syosset-based toy seller, and Toymax, a Plainview toymaker acquired in 2002 by Jakks Pacific Inc.

Went private

Seven Long Island public companies that have gone private since 2000 have given a variety of reasons.

Kamer says a common motive is to escape the pressure of outside investors for profits in the short term, which sometimes compromises long-term benefits. "If the quarterly earnings are a fraction of a point off [what investors expected], their stock gets trashed," Kamer said.

PDK Labs, the Hauppauge-based pharmaceutical maker, went private in 2000 after three former executives and directors were indicted for securities fraud and the company was having difficulty raising what it believed to be an undervalued stock price.

Sandata Technologies president Bert Brodsky told a Newsday reporter in 2002 when he decided to take the Port Washington information services company private that he felt his company's stock wasn't getting the recognition it deserved from investors. Its stock in 1997 traded for as much as $11 a share but was between 31 cents and $1.01 during the six months before the decision to go private.

Brodsky also cited a desire to think and plan for the long term. He and others also cited the higher costs of conforming to stricter regulations spawned by accounting scandals at Enron and other corporations.

Interstate National Dealer Services of Uniondale, which designs and sells service contracts for cars, never gave a reason publicly for going private in 2002, except to say that it was acting on the recommendation of a special committee composed entirely of directors unaffiliated with the Luby family, whose members owned about 25 percent of Interstate's common stock at the time.

The Morton's Restaurant Group, formerly of New Hyde Park, was taken private by a buyout firm in 2002 after a takeover battle with billionaire financier Carl Icahn. At the time, Morton's chief financial officer, Tho.mas Baldwin, told Newsday, "The public equity markets focused too much on the short-term." But Morton's went public again earlier this year -- and moved to Chicago. "

Boundless Corp., an electronics manufacturer based in Hauppauge, blamed a post-Sept. 11 slump in technology infrastructure spending for its bankruptcy. The company is expected to emerge from bankruptcy soon and convert from public to private.

ClickNsettle.com Inc., the Great Neck-based online arbitration service, said in October 2004 that it agreed to sell its business to a private company affiliated with its chief executive, Roy Israel.

Moved away