-Caveat Lector- Colt's Restructuring Cuts Role of Consumer Handguns By PAUL M. BARRETT Staff Reporter of THE WALL STREET JOURNAL Colt's Manufacturing Co., the storied gun maker, is restructuring in a way that will shrink significantly its role in producing handguns for the consumer market. The restructuring stems from several causes, but in one sense it is the most drastic response so far by a major gun maker to the wave of municipal litigation pending against the firearm industry. Lawsuits filed by 27 cities and counties across the country specifically target the sort of handguns that Colt's is planning to move away from. Internal company documents show Colt's, West Hartford, Conn., is in the process of spinning off into a separate company its controversial project aimed at producing a high-tech "smart gun" that can only be fired by an authorized user. The documents also indicate the remaining core business will be focused more narrowly on production of military small arms, an area that Colt's has emphasized heavily over the past two years. New York financiers Donald Zilkha and John Rigas, who control the manufacturer, have used Colt's as a vehicle to acquire other makers of small military arms, and the restructuring appears to be another step in that direction. In fact, there are rumors in the gun business that Colt's is close to a new acquisition of a rival, but those rumors couldn't be confirmed. While immediate plans for the company's well-known lines of consumer handguns aren't clear from the documents that were reviewed, the documents do show that litigation against the gun industry has been a major concern to Colt's owners. Messrs. Zilkha and Rigas have indicated in the past that they would consider getting out of consumer handgun manufacturing as a way of trying to minimize their exposure to the municipal lawsuits. Messrs. Zilkha and Rigas didn't return telephone messages. Steven Sliwa, chief executive of Colt's, said he is going to head the new high-tech spinoff, which is known as iColt. Retired Gen. William Keys, a Colt's board member, will take over the remaining core Colt's business, focusing on military small arms. "Gen. Keys and I are looking forward to working together on the two ventures and taking Colt's into the 21st century," Mr. Sliwa said. Among major gun makers, Colt's has been among the most determined to send signals that it wants to resolve the municipal litigation without a protracted and expensive court fight. But a quick settlement of the suits doesn't appear to be part of the restructuring plan, and lawyers representing Colt's are continuing to try to get those suits dismissed. The commercial handgun segment of Colt's business produces about 30% of revenue but a larger share of profit, because margins are greater in that segment than in military sales, the company documents show. Nevertheless, Messrs. Zilkha and Rigas are said to see the commercial handgun market as too risky to remain a major part of the overall business. The company has struggled financially for more than 15 years, seeing itself surpassed by more nimble competitors in markets ranging from law enforcement to military rifles. A Zilkha-led group bought the company while it was in bankruptcy-court proceedings in 1994 and since then, Colt's has won back some important U.S. military contracts for its M-16 family of rifles, among other weapons. In December 1998, Colt's also completed its acquisition of Saco Defense Corp., a smaller maker of military arms, and remains in the hunt for another acquisition in the area. In 1998, Colt's and Saco had combined revenue of about $136 million and operating profit of $13.4 million, said a person familiar with both companies' results. One risk the restructuring creates is a negative reaction from activist gun owners, who could perceive a withdrawal from the consumer handgun market as another indication of Colt's bending to gun-control proponents. Gun owners in New Jersey, California and other states mounted a boycott of Colt's products last year, partly in response to the company's development of the smart gun, which also was seen as a manifestation of weakness in response to gun foes. On the other hand, by spinning off iColt, Colt's may be able to distance itself from the smart-gun controversy. The smart gun is an effort to use microprocessor technology to prevent the misuse of guns by children, thieves or other unauthorized users. Colt's has developed a prototype handgun that can fire only when the trigger is pulled by someone wearing a wristband that emits a coded radio signal that is received by a computer microchip in the gun's handle. Still unreliable as recently as this spring, when it was demonstrated for The Wall Street Journal, the smart gun is ultimately seen as a product that would appeal to middle-class consumers who wouldn't otherwise buy a gun because of safety concerns. Several other major gun companies, including Smith & Wesson Corp., a unit of Britain's Tomkins PLC, are scrambling to perfect smart-gun models, but it remains to be seen whether the idea will succeed commercially and whether pro-gun activists will punish companies that identify themselves with the smart gun. ================================================================= Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT FROM THE DESK OF: <[EMAIL PROTECTED]> *Mike Spitzer* <[EMAIL PROTECTED]> ~~~~~~~~ <[EMAIL PROTECTED]> The Best Way To Destroy Enemies Is To Change Them To Friends Shalom, A Salaam Aleikum, and to all, A Good Day. ================================================================= DECLARATION & DISCLAIMER ========== CTRL is a discussion and informational exchange list. Proselyzting propagandic screeds are not allowed. Substance—not soapboxing! 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