John Hover:
Navigating his craft into the mainstream

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John Hover achieved the frustrated customer’s ultimate revenge: He figured out how to improve the product that irked him, started his own company, tapped the market of other frustrated users and now sells as well to some of the very manufacturers who triggered his frustration.
Hover-Davis Inc. began in 1989 as a seat-of-the-pants operation based in a couple of barns behind its founder’s Hilton home. The company, which posted revenues of roughly $20 million in 1997 and ranked fourth on the 1998 Rochester Top 100, has doubled sales in each of the past three years.
The business now employs 102 workers at a 17,000-square-foot assembly plant in Spencerport, and operates a research and development facility staffed by seven people in Santa Cruz, Calif.
The products Hover-Davis makes are devices virtually unheard of outside of the electronics industry–tape feeders that spin out reels of microchips to be placed on circuit boards. The feeders, in turn, are one part of larger devices called pick-and-place machines.
The innovation on which Hover-Davis’ fortunes were built was a redesign of standard-equipment tape feeders for pick-and-places made by Fuji Machine Manufacturing Co. Ltd. Hover became familiar with the Fuji machines during the 1980s as an Eastman Kodak Co. engineer in charge of implementing surface-mount technology.
SMT is a method of placing chips on circuit boards. Used in the manufacture of sophisticated weaponry and NASA equipment since the 1960s, it did not filter down to consumer electronics until the 1980s.
The through-hole method it replaced had chips secured to boards by tiny prongs that had to be hand-placed through holes and then soldered. By contrast, SMT lets chips be mounted and soldered by robotic pick-and-place machines, which greatly speeds the process.
The process also allows for smaller and more densely packed chips. Without the miniaturization SMT makes possible, devices such as palm-sized cell phones and computers could not be produced.
At Kodak, Hover found tape feeders to be a weak link in the chain.
Chips come on different-size reels and are stuck to either paper or plastic backings. Different reel sizes and backings work better on different jobs. On the Fuji machines Kodak used, each change of reel size or backing meant changing the tape feeder. If a job demanded a feeder not on hand, it could take weeks for a replacement to arrive.
Fuji and other pick-and-place OEMs were not paying much attention to users’ grumbling about tape feeders, Hover says. He began to see the pick-and-place machines’ failing as an opportunity.
In 1989, Kodak was in the early stages of what has become a seemingly permanent downsizing. Then in his late-30s, Hover took an employee-buyout offer that gave him a year’s salary, and started working on designs for a more versatile tape feeder for Fuji machines.
His only seed capital was the Kodak money, whatever he could persuade friends and relatives to sink into the fledgling firm and money borrowed on credit cards.
Peter Davis, whom Hover had met in the 1970s when both were enrolled in a tool-and-die apprenticeship program at Kodak, became a partner in the venture. Davis is a Rochesterian whose father had spent 40 years working in Kodak’s electric plant.
When the program ended, Davis took off to spend a year and a half rock climbing out west. He eventually settled in California and went to work for a start-up computer-drive firm, Seagate Technology Inc.
Hover, who grew up in the Binghamton area, completed a one-year certification program in industrial machine tools in 1971. He worked in machine shops and at tool-and-die firms in the Finger Lakes region for a few years before starting the Kodak program in 1973.
When Davis took off, Hover stayed at Kodak and worked his way up to engineering. He went into automation, ran the robotics lab at the photo giant’s Elmgrove facility and finally became head of SMT.
The pair stayed in touch. And when Hover wanted to go into the tape-feeder business, Davis was an enthusiastic backer.
In the early years, Davis says, the tape-feeder company was almost entirely Hover’s baby. He consulted and advised, but remained at Seagate.
Hover designed the company’s first feeders, which allowed changes of reel size or backing. He farmed out parts production to various shops around Rochester, assembled the devices and hawked them himself, barnstorming around the country in his pickup to call on customers and to push the product at trade shows.
Though others have made stabs at selling aftermarket tape feeders, Hover played the key role in creating a market for tape feeders sold as individual items, and to this day continues to dominate the arena, said Jeffrey Timms, manager of Global accounts for Siemans Energy and Automation, a subsidiary of Siemans AG of Germany. Hover, he says, “has taken (aftermarket) tape feeders from a niche world to the mainstream.”
Hover-Davis makes several specialty feeders for Siemans, which anticipates using more of the Spencerport firm’s products in the future, Timms says. While smaller competitors are trying to enter the market, Timms believes they will have a hard time catching up.
The company still farms out production, which has worked into a small bonanza for the firms lucky enough to have been early suppliers to Hover-Davis.
“John is a great guy,” says Alan Visingard, president of Vern’s Machine Inc. in Marion, which turns out a variety of screw-machine parts for Hover-Davis. Visingard was among the first to supply the company, and has seen Hover-Davis grow to become “one of our best customers.” Indeed, the firm now is Visingard’s third-largest customer.
Hover initially tried to interest Fuji itself in buying his feeder, figuring it would be best to serve as a vendor to the Japanese firm. He made some headway with Fuji USA, but the company’s decision-makers in Japan equivocated.
Rather than wait for Fuji, Hover went into high gear on Plan B.
Hover was reasonably confident that end-users such as Compaq Computer Corp. and Intel Corp. would be ready buyers. He had contacts such as the head of Kodak SMT, so he knew whom to call and what they wanted. Initially, he peddled replacement parts for Fuji feeders, banking on the supposition that he could supply the aftermarket parts faster than Fuji.
By 1990, Hover-Davis was doing well enough to hire its first employee. The following year, Hover took the firm’s first tape feeder to a trade show in Anaheim, where it was an instant hit. Made to fit a Fuji pick-and-place, it required less maintenance and was more versatile than the original-equipment part.
His first big order went to AT&T Corp. Others followed, putting the company on a modest growth track for the next few years.
Hover, who still sees becoming a supplier to OEMs as the company’s best hope, continued talks with Fuji. In 1993, he began talks with Motorola Corp. about designing an electric feeder to replace the mechanical models that were state-of-the-art at the time.
“Motorola didn’t put any money into the project, but the understanding was that they would buy it if we could come up with it,” Hover says.
Davis, who still was at Seagate, did most of the design work on the electronic feeder, which Motorola bought.
With two products, Hover says, the business began to grow in earnest. Financing still was a little tricky. After piling up $100,000 in credit-card debt, he had graduated to selling his receivables to factors, whose interest rates when annualized often rival or surpass credit cards.
Hover at various points investigated venture capital; it never worked out. Few venture capitalists will put money into a firm as small as Hover-Davis was when it started–especially when the firm has no patentable products, which was the case here.
And while the company in only a few years grew large enough to attract venture capital, Hover says he shied away from it because potential investors wanted at least 50 percent of the firm.
Through the 1990s, Hover has managed to put the company in a better cash-flow position by widening its markets and its product line.
To gain new markets, he took his show on the road globally, flying to South America, Europe and Asia to sign with distributors in those regions. Half of Hover-Davis’ business now is international, and the company has established a North American network of manufacturers’ reps as well.
Hover continues to see OEM pick-and-place companies as a market for his firm. Fuji still balks at putting Hover-Davis feeders in its machines, even though it sometimes must install them for field tests demanded by end-users who spec Hover-Davis feeders.
After five years of talks between the two firms, Fuji in 1995 threatened Hover-Davis with a patent-infringement action if it did not stop selling replacement feeders for Fuji machines. Hover-Davis responded with a pre-emptive court action, seeking to make Fuji desist. Both Hover and Davis decline to comment on the suit, which still is pending.
Meanwhile, in 1995, Hover-Davis started supplying specialty feeders to the Binghamton-based Universal Instruments Corp., a smaller player than Fuji, but still among the top five automation firms in the pick-and-place arena. Since then, Hover-Davis has picked up similar contracts with Siemans and a few other OEMs.
“(Hover) is a shrewd businessman,” says Ian deSouza, Universal Instruments vice president of corporate operations. “We’ve had a number of in-depth conversations. He listens, and I believe he personally understands the industry. He doesn’t wait for information to come to him. He goes out and seeks it.”
Davis quit Seagate in 1996, and now heads Hover-Davis’ Santa Cruz R&D facility as vice president and chief technology officer. He most recently developed a direct-drive, non-reel feeder that he and Hover think will be an integral next step in chip placement. Other new products include a bar-coding application.
Hover says such efforts are key to maintaining the company’s red-hot growth rate, a pace he thinks it can keep up for several years to come. He and Davis constantly scout trade shows and visit customers to pick up clues to where the market is headed. If Hover-Davis can keep diversifying its product offerings, Hover says, the business will continue to prosper.
Another key to the firm’s success, he adds, is its culture. Hover says he has worked hard to foster a non-hierarchical and informal atmosphere–a sort of Spencerport version of Silicon Valley that he characterizes as “no ties and plenty of profit sharing.”
This formula, he adds, makes Hover-Davis a nimbler firm than the global OEM giants that dominate the chip-delivery-machine market. When Fuji came out with a new machine recently, Hover-Davis had an improved feeder to fit it on the market in two months.
Last year, Hover asked the Industrial Management Council do an employee-satisfaction survey. He is intensely proud of the results: 99 percent satisfaction, a showing that the IMC told him was unmatched by any company it had ever surveyed.
Besides the no-ties informality and profit sharing, Hover says, he virtually always promotes from within and tries to involve workers in the firm’s strategic decisions as much as possible.
Says Hover: “I’m the opposite of a control freak. I want to have a succession plan. I don’t want to be in a position that if I get hit by a bus, the company goes down the tubes.”

1/8/99