Don’t be surprised if you see another revolution from Jim Jannard, founder and chairman of Foothill Ranch-based Oakley Inc.
Only this time it will be at his passion turned side project: Lake Forest-based Red Digital Cinema Camera Co., a digital movie camera startup he backs.
“Jim is hard at work rolling out the next version of a professional digital camera that could revolutionize the film industry,” said analyst Eric Beder at Brean Murray, Carret & Co.
Red Digital Cinema could see more face time from Jannard after the sale of Oakley to Italy’s Luxottica Group SPA goes through as planned.
Jannard, Oakley’s majority owner, recently announced the company was being sold to its biggest competitor in a $2.1 billion deal that surprised almost everyone.
The news hit just a few years after Jannard passed his chief executive hat to Scott Olivet, who joined in 2005.
Olivet spearheaded a slew of changes: new management, renewed focus on sunglasses, expanding stores with acquisitions, a move into designer shades and growing the women’s business.
“Since Oakley was starting to make headway with the new management team it seems odd, timing wise,” for a sale, said Mitch Kummetz, analyst at Robert W. Baird & Co. “I was surprised. It seems there wasn’t any need to sell the business.”
So, why did Jannard, who named the company after one of his dogs and is well revered by workers, decide to sell?
Jannard declined to comment for this story, as he typically does when asked for interviews. Since 1975, when he started Oakley with motorcycle hand grips, he has kept a low profile, rarely talking to the media.
Analysts have their own theories, with Red Digital Cinema,a place where Jannard can create and tinker,in the background.
“I think the price was right for him,” Beder said.
Jannard has a 64% stake in Oakley, which is worth about $1.3 billion in the buyout. The deal, expected to close in the second half of the year, was liked by shareholders, who’ll get 16% more than what Oakley was valued at before the offer.
There are other reasons, Beder said.
Changing Oakley
Oakley’s business has changed through the years, with Jannard taking more of a backseat when Olivet came on board, he said.
Olivet is good at running things. Jannard rather would tinker. He is a self described “mad scientist” who is obsessed with technology and designing.
In the past, that meant coming up with products that were radical,things Jannard and his team liked. They didn’t care if customers sometimes balked or saw things as too spacey.
But things have changed as Oakley has grown.
The company still comes out with edgy products, but in some cases it has toned down spacey designs so the company can take the brand wider.
Oakley’s also making bigger plays in fashion sunglasses with recent acquisitions, such as Los Angeles-based Oliver Peoples and Optical Shop of Aspen in Aliso Viejo. Plus, it’s focusing more on the women’s market.
“Oakley was expanding beyond its technology roots via acquisitions, which while they made corporate sense, were a sign that the days of living and dying only by ‘mad science’ were on the wane,” Beder said.
All things converged,good price, Oakley’s expansion and Jannard’s desire to tinker, according to Beder. That likely led to Jannard finally letting go, he said.
Jannard still will be involved in Oakley, though, according to the company.
Lance Allega, Oakley spokesman, said after the sale Jannard will remain as “chief mad scientist” and “chief visionary” and “play a continuing role in our product design.” He could also sit on a board of advisers for Oakley once the deal closes, Allega said.
“They need us to continue to do what we do well and Jim is part of that equation,” Allega said. “There’s no plan for him to ride off into the sunset.”
In early June, Oakley sweetened the severance packages for top executives in case the company was acquired.
Allega said Oakley’s top executives are staying put for now, with Olivet set to report to Andrea Guerra, Luxottica chief executive.
Some analysts wonder if there will be an exodus, like what happened at Arnette Optical Illusions Inc., an edgy Orange County sunglasses maker that Luxottica bought in 1999. Kip Arnette, son of Arnette founder Greg Arnette, left to start Electric Visual Evolution in San Clemente. Others left or were laid off when distribution shifted elsewhere.
“There was a strong corporate culture with Arnette, and then you’re working with a group of Italians across the continent,” Kummetz said. “It wouldn’t surprise me the least bit if you saw some people defect at Oakley.”
Adds Beder: “There is definitely a fear that Oakley will never be the same.”
But Oakley sees things differently.
One of the reasons Jannard went with Luxottica is he felt the company had “come to understand the brand is our culture and our culture is part of the brand,” spokesman Allega said.
“It must be preserved,” Allega said. “We are who we are and Luxottica is keenly aware of how our culture permeates all that we do as a company right down to our consumers.”
Allega said Luxottica’s Guerra reassured Oakley workers himself that Oakley’s brand or culture won’t change. The company’s headquarters is expected to stay in Foothill Ranch.
“This is not one of those acquisitions by Luxottica where we are restructuring from A to Z the company that we buy,” Guerra said in a conference call. “We are combining two strengths. We are combining two leaders. We like Oakley. We understand the potential of Oakley around the world.”
Jannard said in a statement that he intended to invest in Luxottica after the purchase of Oakley was finished.
Jannard also signed a five-year non-competition agreement that starts at the close of the sale.
Red Digital
Sunglasses may be temporarily off the table. But Jannard, a photography buff with his own Web site highlighting artwork, already has been investing some spare time at Red Digital Cinema. The company is working hard on a high-resolution digital camera for shooting movies and other productions.
It’s been given a lot of hype in industry magazines. Red Digital Cinema hopes to sell directors and others on the camera as a cheaper, easy way to make movies with quality similar to film.
“Looks like it’s just about to go into production,” Brean Murray’s Beder said.
The camera, which is set to sell for $17,500, could be produced by the end of the year. The first models are set to ship in spring.
