January 2001 Issue  Volume 2  Number 1

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The Meaning of Freedom (and the Merger of Freedom Scientific)

Significant change is often especially hard in a small community, and so it came as no surprise that the creation of Freedom Scientific last April was greeted with a flurry of rumors and speculation. The new company arose from the merger of three of the best known assistive technology companies in the blindness field—Blazie Engineering, Henter-Joyce, and Arkenstone. Now that the dust has settled somewhat, let's examine what the impact of Freedom Scientific will be on technology for people who are blind or visually impaired.

Business, capital, growth, and management are words that come up often when talking with the principals who created Freedom Scientific. Ted Henter, who built Henter-Joyce and its flagship product JAWS for Windows into a formidable player in the assistive technology field, explained that he had begun to look for buyers for Henter-Joyce two years ago. "I had no business degree and I needed someone to help us grow by handling business and administration." Arkenstone's Jim Fruchterman agreed, "Arkenstone had found limits to our business model. The main limit was we ran a break-even business, which means you don't have a lot of money for new ideas or new products. We had identified the need to raise several million dollars to do the kind of things we thought necessary." Meanwhile, Richard Chandler, the CEO and driving force behind the creation of Freedom Scientific, had become interested in assistive technology, and in 1999 he journeyed to the assistive technology conference known as CSUN (the "Technology and People with Disabilities" conference sponsored by California State University-Northridge) and was impressed by many of the niche companies he found there. Chandler was ready to expand his business, which at that time was focused on home medical devices like wheelchairs. Referring to the assistive technology industry, he said, "These companies had higher margins, higher growth rates, more proprietary technologies, and fewer competitors—a lot of benefits that I didn't see anymore in the 'metal-bending side' of disability products." He saw the opportunity to apply business discipline to help these companies accelerate the development of their products and grow enough to market them nationally and internationally.

Freedom Scientific Emerges

As Chandler began to develop the idea of merging some of these assistive technology companies into his medical company (Sunrise Medical), things suddenly turned sour. According to Chandler, the business for medical products fell dramatically in the late 1990s. Prices dropped, and major purchasers like Medicare further tightened restrictions. It was clear by 1999 that Sunrise Medical was not going to be able to secure financing to make acquisitions.

He left the top job at Sunrise on October 5, 1999, and flew immediately to Orlando to attend the Assistive Technology Industry Association conference. He met there with Ted Henter, who had already considered selling Henter-Joyce to Chandler's old company; and Deane Blazie, Jim Fruchterman, and other leaders in the field. Within months, Chandler was gathering the venture capital he needed to merge the companies. In April 2000, the initial merger of Blazie and Henter-Joyce into Freedom Scientific was announced, and in June Freedom Scientific acquired Arkenstone.

Too big, too powerful?

Perhaps inevitably, consumers and assistive technology dealers have expressed concerns about the potential for Freedom Scientific to use its size and power to gain a near monopoly on technology products for blind consumers, driving out competitor's products. Jim Halliday is concerned about the impact of Freedom Scientific, a competitor to Halliday's HumanWare. In July 2000, Chandler sent HumanWare a letter terminating an agreement that had allowed HumanWare to be a dealer for JAWS. The letter referred to HumanWare's distribution of products that compete with Freedom Scientific's line of products. Halliday says he recognizes that this is a business and that HumanWare is a competitor, but he doesn't understand why Freedom Scientific would make this move against such a large distributor of its products. "They've turned a win-win situation into lose-lose," because HumanWare is now selling a lot more competing screen readers. Chandler defended the decision, noting that HumanWare is not just a dealer ("I call them a manufacturer, he said"). Thus far, none of the assistive technology dealers interviewed for this story said that Freedom Scientific had terminated arrangements for selling their products, though some expressed the fear that this might happen. Perhaps more troubling is Halliday's fear that the venture capitalists and potential investors behind Freedom Scientific will likely not realize the profits they were promised and that blind and visually impaired consumers would suffer if these investors took their money out of the company. "Ted Henter and Deane Blazie built good companies, and they helped to build an industry," Halliday says. But, he's worried about history, noting that Sunrise followed the same pattern of rapid growth through the acquisition of companies, only to have the stock price drop precipitously and the company suffer a serious decline.

Fruchterman discounted the fear. Even if things turn downward, he noted, the capital that has been brought to these companies means they will be in a better place to weather the storm. According to Chandler, a market failure would mean that Freedom Scientific was not keeping up with the market and that someone else was producing better products.

So What Have They Done Lately?

The mundane tasks of management have dominated business at Freedom Scientific over the past several months. The blindness and low vision group within the company has been merged into two divisions, one focusing on software (comprised of Henter-Joyce's JAWS for Windows and MAGic and Arkenstone's Open Book) and one for hardware (largely the Blazie line of notetakers and braille displays and the VERA reading machine from Arkenstone). The company's operations have been centralized in Florida and customer service, sales, and marketing efforts have been consolidated. Of course, new products in all these areas have also been announced.

Chandler said he is spending a lot of time talking with customers. He also talked about the challenge of bringing management discipline to the companies that make up the blindness and low vision group at Freedom Scientific. "These companies had different policies, attitudes toward customers, cultures, and business management strengths. "The challenge," he said, is to "introduce management disciplines in cultures that are classic mom-and-pop businesses where there's resistance to change, resistance to the formality that you need, the documentation, and the rigor."

What's Next?

In the short-term, Freedom Scientific's management is focused on—management. Chandler spoke of measuring the length of hold times for customers waiting for technical support, for example. In addition, the company is now focusing on repair turnaround times and product warranty use rates. Freedom Scientific is also moving to expand its sales and marketing efforts. Regional sales staff are now being hired, and Chandler said he hopes to grow the sales staff so that all major cities have a representative.

Responding to questions about the advantages of the merger, Freedom Scientific officials spoke of "synergy." That means new products with new combinations of functions and faster development of technologies. There is also the tantalizing prospect of lower prices as a result of higher volumes.

Although no one at Freedom Scientific would commit to new products currently being planned, there was talk about improving the interaction between notetakers and screen readers, and Chandler speculated about the value of combining functions such as cell phones or GPS (wayfinding technologies) with a notetaker.

Henter and Blazie are now vice presidents at Freedom Scientific. Fruchterman, heading up the new nonprofit company Benetech, said that one of the most appealing things about the merger that created Freedom Scientific is that the scanning products that Arkenstone developed will be improved and upgraded far more rapidly than before. "We always had to drop development on one of our products while we worked on the other," Fruchterman said. As for when we might begin to see some of this "synergy," Henter expects Freedom Scientific's products to show the improvements by the second half of 2001.

The Bottom Line

The success of Freedom Scientific depends on its ability to grow by expanding the market for assistive technology. Prospects for growth exist in several markets. Outside the United States, Freedom Scientific officials see vast opportunities to sell technology benefitting people who are blind or visually impaired. Here and abroad, the aging baby boomers comprise a rapidly growing market, especially for low vision products. However, Freedom Scientific's product line is weakest in the low vision area, some assistive technology dealers interviewed for this story have suggested. (Many in the field have speculated that Freedom Scientific is looking for a CCTV manufacturer as one of the next acquisitions, but officials at Freedom Scientific would not provide any details on their expansion plans.) Finally, Chandler sees the possibility of growing sales of blindness and low vision products in the U.S. market, particularly if Freedom Scientific can improve the pricing and performance of its technology.

The emphasis on growth is key because the goal is to take Freedom Scientific public in three to five years. This change would bring vast amounts of capital into the company, but it would require much higher sales and carries the risk of investors dropping the company if sales fall short.

The large investment of cash in Freedom Scientific and the focus on sales and marketing invites comparisons to Microsoft. Not surprisingly, Chandler responded to the analogy by suggesting that Microsoft has benefited consumers through lower prices and more features in computer software. Nonetheless, other companies in the business will have to improve their ability to build partnerships and invest in technology development. Major purchasers and assistive technology dealers will also have to take care to screen out marketing hype and ensure that consumers get what they need even if that product is not the most marketed or most popular. Chandler said that Freedom Scientific's market power could expand the assistive technology market for all blind and visually impaired consumers. Let's hope that is true.

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