22 July 2007
Jon W. Glass
Portsmouth, VA, 22 July 2007
Shipyard owner Jerry Miller has a growing list of products and customers that has little to do with ships.
That may seem odd, considering that Miller’s Earl Industries, based on the Elizabeth River, last year ranked 32nd on the Navy’s top 50 contractor list, hauling in ship-repair contracts worth $160.3 million. That’s more than any other locally owned yard.
But these days, Miller is banking on manufacturing and technology to propel profits. It’s a reality of the post-Cold War era, he says, as the fleet has shrunk and competition has grown.
“There’s only so many ships out there, and only so much work to get,” Miller said.
Where possible, his strategy to diversify draws on shipyard skills, such as welding and metal fabrication, and the military remains a fertile ground for Miller’s business. His manufacturing group, for instance, snagged a contract last year from the Marines to outfit metal containers with portable airfield-repair kits – complete with cement mixers, front-end loaders and generators.
Some of the products, however, seem to be a strange fit.
One is the stainless steel doughnut-making machines Earl now turns out for a Seattle company. Another is the hardened-steel “bone shavers,” used to cut human bone – precision-cut to 0.0005 of an inch – the company crafts for a biomedical engineering firm.
He’s even bought a nearby waterfront restaurant.
With technology, Miller has steered Earl further afield, as he tries to position the company to exploit the potentially lucrative world of high-tech software.
Over the past 18 months, Earl has acquired a majority stake in two Suffolk-based technology firms – four-year-old Echo-Storm, which has developed a novel way to gather and disseminate video and data, and start-up CorMine Intelligent Data, or CID, hoping to make its mark with data-search software. They are now Earl subsidiaries and part of its new Technology Group.
With any luck, Miller says, the diversification gambit could add $50 million this year to Earl’s bottom line and boost its annual revenue stream – now about $200 million – by 20 to 25 percent.
As he’s branched out, Miller has made bad bets. About six years ago, Earl lost big on an investment that looked like a sure winner to build cell phone towers. After all, Miller reasoned then, Earl worked with steel, rigging and electrical systems. But the market turned out to be more expensive and competitive than he anticipated.
“I was a lot more gullible then,” Miller said. “I’m a lot tougher now.”
Miller, 52, is a trim man who seems in perpetual motion.
He gets where he’s going in a hurry in a silver Porsche Cayenne – “the fastest SUV in the world, they tell me.” He lives in a two-story brick house on Lynnhaven Bay in Virginia Beach that sports a pool, a boat dock, and a city real estate assessment of $2.4 million.
A 1977 Naval Academy graduate, Miller put in 7-1/2 years as a Navy surface warfare officer. In 1985, he became Earl’s second employee, joining Jim Earl and Earl’s stepson Frank Wagner, now a state senator from Virginia Beach and one of Miller’s Annapolis classmates.
Four years later, Miller bought the business – then run from a landlocked cinder-block building in a gritty, blue-collar section of Port Norfolk.
Since then, he has assembled a mini-empire that stretches from the Portsmouth waterfront to the city’s core several miles inland. It’s hard to drive down a street in Port Norfolk without passing a Miller property. Among other holdings, he owns a 60-acre shipyard and an industrial and manufacturing operation that spans two city blocks.
With about 600 local employees and property scattered among 20 addresses – some leased to other businesses – Earl is one of Portsmouth’s top 10 employers and taxpayers, according to city records.
More expansion could be coming. He’s driven test piles for a new five-story headquarters he hopes to build at his Harper Avenue shipyard. He’s eyeing an adjacent 21 acres fronting Scotts Creek for another office building he’d lease out.
In 2005, Miller purchased the Flagship Restaurant, across the creek from his shipyard, thinking it would be a nice selling point for the office property.
“Jerry always thinks big,” said Steven Lynch, Portsmouth’s director of economic development. “He’s the type of corporate client you look for in a city.”
His reach extends well beyond Portsmouth. During the 1990s dot -com boom, Miller earned a name in Virginia high-tech circles as an angel investor, providing seed money to bankroll start ups.
One of the most successful, Hampton-based CorMine LLC, a procurement services firm, generates revenue of around $80 million and said Friday it had merged with tech company Perfect Commerce. CorMine Intelligent Data, equipped with a license for a specialized data-searching software, is a joint venture between Earl and CorMine.
In 1995, Miller – uncertain about the future of ship repair – sold Earl to Digital Systems Research, a Northern Virginia computer systems integration company. He invested in real estate with some of the proceeds, mostly in Virginia Beach. He has bought some 200 acres around London Bridge Road, much now developed with office-warehouses, and he sits on the resort city’s Development Authority.
Five years after selling the shipyard, Miller, who had stayed on as president, bought it back. “I wasn’t happy working for somebody else,” he said.
Several years ago, Miller befriended Carl Levin, a Democratic senator from Michigan, after they met through a pro-Israel lobby. Now, with Democrats controlling Congress and Levin chairing the powerful Senate Armed Services Committee, Miller has the ear of a man who could help steer defense dollars to Hampton Roads.
Last month, Miller threw Levin a fundraising breakfast in Norfolk, taking the senator on a boat ride and sending him back to Washington with a campaign chest some $30,000 richer.
“Jerry’s got more balls up in the air than anybody I know,” said Lee Murphy, who runs an industrial division for Earl that specializes in waterblasting and coatings. “He’s always thinking, ‘What can I do next?’ ”
With a long list of contacts that includes old Naval Academy buddies, Miller has a knack for turning friendships into business opportunities. An old high school friend who became an IBM engineer got Miller a foot in the door, enough to help then-start up CorMine land a contract to provide procurement services for Big Blue.
“To me, IBM was just like another Navy,” Miller recall ed. “They’ve got billions and billions of dollars passing through. I said, ‘I’d like to get involved in that somehow.’ ”
As Navy work became less reliable in the early ’90s, Miller began to diversify as a way to buffer his skilled trades workers from feast- or-famine cycles. Rather than lay off employees, Miller found other jobs for them to do.
In his first move, in 1992, Miller launched a separate sandblasting and painting company, which since has become part of Earl’s United Coatings division. While still focused on marine work, it has refurbished steel railroad bridges for Norfolk Southern Corp. and cooling towers for nuclear power plants.
Much of Earl’s expansion has come with acquisition of small specialized companies. The 2003 purchase of Portsmouth Tool and Die, for instance, added precision tool making to the shipyard’s inventory. U.S. troops who stormed former Iraqi President Saddam Hussein’s palaces carried a collapsible forced-entry tool made by Earl.
As he fishes for ways to expand, he’s on the constant hunt for bargains – something he picked up from his late father, who ran a junkyard in upstate New York. He snapped up two 30,000-square-foot buildings on Victory Boulevard at a bankruptcy auction for what he considers a cheap $900,000. He found a “gently used” metal puncher, which easily costs a million dollars new, for a quarter of that price to go in the manufacturing plant.
At the same time, he’ll spend big if a case can be made for it. He’s spending $2 million to install a custom-made robotic water jet, which slices metal along seven axes, to fill orders for a customer in the aerospace industry.
“You can pay for a piece of equipment like that in one or two contracts,” Miller said.
These days, the companies that do work with Earl “reads like a Fortune 500 list,” said Mike Barkan, its sales and marketing director. They include the likes of General Electric, Canon, Alcoa, Boeing, Northrop Grumman and Stihl.
Barkan, former owner of a chemical company who had golfed with Miller, was recruited 2-1/2 years ago to drum up new business. One of his projects is the doughnut-making machines. A Virginia Beach company that makes doughnuts provided the Seattle lead. Now, Barkan is working on a deal for Earl to install the electronic-run machines in metal containers that would be shipped to Caribbean tourist resorts.
“It would be a combination doughnut factory and retail outlet,” he said. “It’s a great illustration of what we can do.”
Earl has steadily grown its container business, and is now halfway through a $3.9 million contract to outfit the airfield-repair kits for the Marines. Engineers, using a 3-D computer modeling software, designed a way to stow bulky front-end loaders and other equipment, while the company produced a video on how to load them. Rail cars were rammed into the containers at speeds up to 8 mph to test their durability.
For the Navy, Earl has a contract potentially worth $750,000 to outfit five containers for temporary living quarters, complete with bathrooms and bunks. Earl is installing electrical, piping and mechanical systems in water-purification trailers for General Electric.
“This is similar to ship repair – you’ve got pipe, you’ve got mechanical, and we already have those types of craftsmen in place,” said Brian Miller, a former shipyard welder and now Earl’s director of manufacturing who is no relation to his boss.
Jason Barton, who co-founded EchoStorm with his brother David, marvels at the ingenuity of Earl’s engineers. Hoping to land an Army deal, he recently asked them to design a container to house computer hardware. It had to fit in a 9-inch by 20-inch space in the back of a Humvee.
“We piled a bunch of stuff on their desk and said, ‘All this stuff has to fit in this hole,’ ” Barton remembers. In a couple of days, a prototype was ready for testing in Iraq.
“It’s not some clunky, welded chunk of metal,” Barton said. “It is state-of-the-art, very elegant. That was the difference maker for us.”
The Pentagon’s much-publicized effort to transform the military with technology got Miller looking for ways that Earl could go high-tech.
Contacts he made through CorMine led him to the Bartons. Miller and the two 20-something brothers immediately hit it off when they met last summer in his second-story shipyard office.
“You sit down with your ducks in a row, he’ll ask some questions, and if it’s a good thing to do, he’ll say, ‘How can I help?’ ” Jason Barton said. “It’s that how-can-I-help attitude that we like so much.”
EchoStorm, with Pentagon researchers, developed a way to store and distribute video from unmanned aerial vehicles over a secure, Web-based system. When Miller met them, the Bartons were awaiting award of a $7 million contract from the Joint Forces Command to install the system in Iraq.
Miller, who calls the Bartons “brainiacs,” says he was impressed with the potential for the military. And he liked the name EchoStorm.
“I just thought it sounded cool,” Miller said. “It relates to the military, the government, national defense. It got me excited.”
Since that first meeting, EchoStorm has landed additional Army and homeland security contracts valued at around $14 million and has spun off a commercial version of its software. Miller says the Bartons only half-jokingly tell him that EchoStorm will one day be bigger than Earl.
“I say, ‘Go for it,’ ” Miller said. “I have the goal to be a $500 million company, and when we get there, it’ll be a billion. I don’t want to appear greedy. I just want to do everything I can to keep growing.”
This article was originally printed in The Virginian-Pilot, http://pilotonline.com/business/this-shipyard-owner-has-more-on-his-mind-than-boats/article_c51da619-026d-5de9-aa5d-061dea888eb1.html