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Old 16th May 2006, 02:03 PM   #1
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Default Sovtek's sad tale

seems that some Russian entrepeneur covets the property on which Sovtek's factory is located:

a snippet from the NYTimes Story May 16, 2006 (full text here -- )
Click the image to open in full size.

May 16, 2006
From Russia, With Dread
SARATOV, Russia Mike Matthews, a sound-effects designer and one-time promoter of Jimi Hendrix, bought an unusual Russian factory making vacuum tubes for guitar amplifiers. Now he has encountered a problem increasingly common here: someone is trying to steal his company.

Sharp-elbowed personalities in Russia's business world are threatening this factory in a case that features accusations of bribery and dark hints of involvement by the agency that used to be the K.G.B.

Though similar to hundreds of such disputes across Russia, this one is resonating around the world, particularly in circles of musicians and fans of high-end audio equipment.

Russia is one of only three countries still making vacuum tubes for use in reproducing music, an aging technology that nonetheless "warms up" the sound of electronic music in audio equipment.

"It's rock 'n' roll versus the mob," Mr. Matthews, 64, said in a telephone interview from New York, where he manages his business distributing the Russian vacuum tubes. "I will not give in to racketeers."

Yet the hostile takeover under way here is not strictly mob-related. It is a dispute peculiar to a country where property rights whether for large oil companies, car dealerships or this midsize factory seem always open to renegotiation. It provides a view of the wobbly understanding of ownership that still prevails.

In Russia's early transition days, amid the collapse of authority and resulting lawlessness, organized crime groups wielded great influence. Teams of armed thugs used to carry out takeovers, arriving at a businessman's door with little to back them up but the threat of violence, even murder. Indeed, contract murders reached a frequency of more than one a day in the mid-1990's.

Later, law enforcement, from the tax police to special forces units, played a role in forcing transfers of property in the scramble for assets of the former Soviet state.

In what became known as "masky shows," police officers, their faces often hidden behind ski masks, swarmed into a business to intimidate employees and force concessions from owners. The headquarters of the Yukos oil company, for example, were the scene of a series of high-profile masky shows. .

Now, the trend in business crime in Russia is decidedly white-collar with the faking of documents, hiring of lawyers or payoff of judges but no less insidious, Mr. Matthews and other business owners say.

In a puzzling case in Moscow in April, for example, thieves stole a shipping container with thousands of files on company registrations from the yard of a tax inspectorate office, using a crane and a flatbed truck.

"It cannot be excluded that so-called independent raiders, those who seize others' businesses, showed an interest in the tax documents," an article in Gazeta reported.

The article suggested the theft was a coup by corporate raiders who intended to use the papers much as identity thieves in the United States turn documents rifled from trash cans into profits through fraudulent credit card operations. In this type of crime, however, entire companies are at stake.

The tax authorities act as a registrar for small businesses. With the files gone, ownership is anybody's guess, the newspaper reported. Another common tactic of the new takeover artists is faking sale agreements for company shares and then voting out the legitimate management. Tracking down the true owner can be impossible if the authorities have been bribed or the original papers are mysteriously missing.

The problem has become so pervasive among small and medium-size businesses that it has been discussed in the Parliament, where a committee on state security addressed the issue and cited more than 1,400 cases of fraudulent takeovers in 2005.

Across Russia, the Interior Ministry has opened investigations into the theft of 346 enterprises.

"Dozens of major deals for the purchase and sale of companies take place in Russia every month," Yuri Alekseyev, a chief ministry investigator, was quoted as saying by the Interfax news agency. "The process is ever more frequently accompanied by gross violations of the law."

"Those seizing enterprises are usually not interested in production, and just steal or sell the most liquid assets, in the first place real estate," he added.

Foreigners are not immune. Recently, the Canadian owners of the Aerostar Hotel and the French owners of an auto dealership in Moscow were maneuvered out of their businesses.

Here in Saratov, a river town on the rolling southern steppe, the battle began last autumn when Mr. Matthews received a letter with an offer. For $400,000, a company called Russian Business Estates, or R.B.E., would buy Mr. Matthews's 930-employee factory, called ExpoPul, with a turnover of $600,000 or so a month. Mr. Matthews quickly refused.

Next, a letter arrived warning that the factory would have troubles with its electricity; in March, the power went off. Intruders then came and used jackhammers to raise dust that entered the factory's clean rooms. Strange young men in leather jackets loitered outside the factory gate.

Mr. Matthews, a legend among guitarists as the inventor of the Big Muff guitar pedal, rallied makers of musical equipment who rely on tubes from Russia and promised a fight.

R.B.E.'s director in Saratov, Vitaly V. Borin, said he wanted to buy Mr. Matthews's factory for the building it occupies and then sell it to an unidentified investor. He acknowledged that his company was pressuring Mr. Matthews, but he said it was using only legal tactics. If Mr. Matthews does not agree to sell, Mr. Borin said in an interview, the factory might run afoul of national security rules.

"We have instructions of the F.S.B, where it is written in black and white that a military factory cannot exist beside a company with foreign capital," he said, referring to the Federal Security Service, a successor to the K.G.B. Just near ExpoPul is a factory that makes electronic components for military hardware.

"The F.S.B. hasn't gotten involved only because we haven't gotten them involved," he said. Writing a letter to Moscow would be all he needed to shut the factory, Mr. Borin said, as he pretended to write a letter on a napkin.

For Mr. Matthews, more is at stake than property.

In the hulking pile of brick wrapped in pipes and smokestacks that is the building, most of the employees are women. Dressed in blue robes and hair nets, they join together delicate bundles of wire, wafers of rare metal and glass bulbs with fingers trained by years of work.

"No man would want to make a tube," Lyudmila V. Afanasieva, 54, said, nimbly sliding wires into a glass cylinder. She worked on the same tube model when it went into nuclear submarines that prowled off the coast of the United States.

ExpoPul makes two-thirds of the world's vacuum tubes used for music. Outside the old Communist bloc, the technology nearly became extinct. Vacuum tubes are made on an industrial scale only in China, Russia and Slovakia.

Tuned in to the music industry's needs, Mr. Matthews increased sales to 170,000 tubes a month in 2005, from 40,000 in 1999. The company has more than doubled its work force. It sells to Fender Musical Instruments, a maker of guitar amplifiers based in Scottsdale, Ariz., and the Japanese keyboard maker Korg.

While most of the Soviet electronics industry has disappeared, rendered obsolete by Japanese makers and Silicon Valley, ExpoPul, which opened in 1953, is thriving. It is a rare example of a Soviet-era factory that became a success without painful reforms. Hidden in this provincial town, its 1950's vintage technology survived long enough to become a worldwide hit.

If the tube factory dies, so will the future of a rock 'n' roll sound dating back half a century, the rich grumble of a guitar tube amplifier think of Jimi Hendrix's version of "The Star-Spangled Banner" that musicians say cannot be replicated with modern technology.

"It's nice and sweet and just pleasing sounding," Peter Stroud, the guitarist for Sheryl Crow, said in a telephone interview from Atlanta. "It's a smooth, crunchy distortion that just sounds good. It just feels good to play on a tube amp."

He added: "It would be a catastrophe for the music industry if something happened to that plant."
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Old 16th May 2006, 02:09 PM   #2
anatech is offline anatech  Canada
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Hi jackinnj,
More brands than just Sovtek are made there. These stories are heavily slanted towards Mike Matthews, but the truth is in there too.

If this plant goes, expect tube prices to climb. All the brand names that Mike Matthews bought as well as Electroharmonix will be out of production.

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Old 16th May 2006, 09:40 PM   #3
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BooHoo for Mike Matthews!

This is old news. I read this article aournd 6 months ago, at least.
Looks like The New York Times lifed it from somewhere else. I think I
originally saw it in "Guitar Player" magazine.
As for New Sensor... Oh well. I never liked their sales and marketing
tactics. Half of the claims they make about their products are
exaggerated or complete falsehoods. I guess that's what they teach at
Harvard, Yale or whatever prestigious business school Matthews went to.
I do respect him for playing such a big part in keeping tubes available
though, even though they are not that great.
JJ's are better and "winged C" are better.
Basically, the russians are giving Maythews a taste of his own medicine,
granted they are playing much "harder ball" than he is probably willing
to play. Oh well that's business.
He should use some of those multi-millions he's earned and move the
factory to a friendlier part of the world.
Basically it comes down to greed and it looks like
Matthews has found somebody even more so than him.
Oh well...

P.S. Maybe Matthews can get Jerk-off George W. to Nuke those unfair playing ex-commies! George W. to the rescue (again) fighting for the right for US interests to make more of the ALMIGHTY DOLLAR! Which thanks to George W., is not so ALMIGHTY at the moment. HA HA HA HA... How Ironic!
Oops, I need to behave myself here and keep it on-topic. Sorry!
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Old 16th May 2006, 10:11 PM   #4
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This is an old response. I read this reply about 60 minutes ago, at least. Looks like danFrank lifted it from somewhere else. I think I originally saw it in "" newsgroup.

Seriously, though, moving a tube factory is not practical. the issue is the expertise of the employees, not a location. as pointed out in the article, some of the people working there were making tubes way back when. I don't see why governmental pressure would be a bad thing. When private property rights aren't protected, foreign investment has a way of drying up, and that doesn't benefit anyone. as your comments about george bush, well i ain't a fan either but that's the most childish thing i've read in awhile.
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Old 16th May 2006, 10:37 PM   #5
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Guys, we're pretty strict about our "no politics" rule.
"You tell me whar a man gits his corn pone, en I'll tell you what his 'pinions is."
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Old 16th May 2006, 11:15 PM   #6
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I just got some nice Svetlana Coke bottle 5U4's in the mail today. They were probably made there. My selfish thought is the EH etc. tubes aren't very good, and if they aren't around, maybe the market would open for someone to make a good (or even great) tube again. Can you imagine if some visionary (seeing the renewed interest in tube audio) reopened a Mullard or Amperex plant in Germany or Holland. I for one would rather pay outrageous prices to a established company with a real shipping dept. and warranty claim service, than take my chances on epay. It seems to me that as long as junk is being made and people will buy it, there is no chance for quality. BTW my therapy must be working. I somehow held my tongue on the other thing.
"Make everything as simple as possible, but no simpler" Einstein
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Old 16th May 2006, 11:42 PM   #7
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reopened a Mullard or Amperex plant in Germany or Holland
That is funny! Factories in the Germany and the Netherlands aren't being opened...ofcourse.... they are closing down, because it can be done cheaper elsewhere.
If you can see the speaker cone's not hifi.
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Old 16th May 2006, 11:48 PM   #8
anatech is offline anatech  Canada
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reopened a Mullard or Amperex plant in Germany or Holland.
There is another very minor detail.
Mike Matthews owns the rights to those brand names these days. I don't know about Amperex, but Mullard and a few others for sure.

Also, I disagree with Electroharmonix not being good. They are good tubes. I'll miss those for sure if they go.

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Old 17th May 2006, 12:15 AM   #9
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Originally posted by Bas Horneman

That is funny! Factories in the Germany and the Netherlands aren't being opened...ofcourse.... they are closing down, because it can be done cheaper elsewhere.
How true, and add America to the list.
Originally posted by anatech

There is another very minor detail.
Mike Matthews owns the rights to those brand names these days. I don't know about Amperex, but Mullard and a few others for sure.

Also, I disagree with Electroharmonix not being good. They are good tubes. I'll miss those for sure if they go.

I wouldn't be hung up on a "name", just give me an outstanding tube. EH is not a "bad" tube, but from my experience, I would (and do) pay triple the price for tubes that my wife can hear the difference in. IMHO
"Make everything as simple as possible, but no simpler" Einstein
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Old 15th December 2006, 01:15 PM   #10
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Anyone has the update on the outcome of this fight?

Their survival is crucial to all the music lovers....
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