Eltron left at the altar as merger with bar code firm fails to scan.

It was close, awful close.

In mid-November, Simi Valley-based Eltron International Inc. looked poised to become the largest maker of bar-code printers, software and supplies in the country, placing it atop an industry expected by analysts to reach $9 billion in annual revenues by the end of the decade.

The planned acquisition of Vernon Hills, Ill.-based Zebra Technologies, the current market leader, would have been a crowning achievement for 4-year-old Eltron, which has seen sales jump from $2 million in its first year to projected 1996 sales of $90 million.

But the marriage was not meant to be. After a month of talks, the two sides called off the merger when they could not agree on who would run the new company.

For Eltron CEO Donald Skinner, who would have become head of the new bar-code empire, it was worry over being slowed in daily operations by an overly involved board of directors that nixed the deal.

"Running a company, you have to be able to move very quickly; you don't have time to discuss each idea," Skinner said. Though a disappointment, Skinner said, the failed merger will not change Eltron's aggressive, fast-growth operating style.

Eltron began in 1992 when Skinner bought the rights to thermal-printer technology he helped develop at Axiom-Edwards-CPE Inc., a maker of magnetic storage tape in San Fernando.

Skinner had been hired by the struggling Axiom to make the company profitable and then arrange its sale.

"There was a product I'd developed to try to boost the revenue (of Axiom), a kiosk printer for doing various things like in-hotel and in-airport sending and receiving of faxes," Skinner said. "That product, the company we sold to didn't want, so I made an offer."

Having finished his assignment at Axiom, Skinner "started to look around for what we could use thermal for. That's when I found bar codes."

Bar codes have become ubiquitous identification cards. When scanned by a laser, the code's vertical lines are converted into numbers and letters that identify the product and can provide information on price, availability and where it was made.

Use of bar codes has grown steadily since their development in the 1960s, as the cost of printers and scanners has dropped. Though most common in supermarkets, they're used by airlines to tag luggage, by delivery companies to keep track of shipments and by hospitals to identify lab samples.

A veteran of computer hardware manufacturing and its demands for short product development cycles and thin margins, Skinner set about creating Eltron with minimum investment and an eye on economy. The firm got a cheap lease from a high-vacancy Simi Valley business park and bought second-hand furniture to fill the offices.

Assessing the market, Skinner saw existing bar-code printer makers were "going to be producing higher and higher performance products with more features. I elected to go with lower performance and fewer features."

With an initial printer that sold for about haft of what other devices cost, publicly held Eltron helped define and capture the low-end market. It has released new products every nine months like clockwork, Skinner said.

The company sells a line of printers that spit out bar-code stickers and retail for less than $1,000. Its target market is quite broad - small and mid-sized firms, and larger companies such as United Parcel Service of America Inc., which buy tens of thousands of the machines for outlets around the country.

Zebra, in contrast, has concentrated on higher-end machines for factories and warehouses, where each unit must print hundreds of thousands of labels in its life span.

But over the last year or so, both firms have been creeping into the other's realm. Last March, Eltron bought Monrovia-based RJS Inc. to expand its high-end product line. And analysts say that in light of the failed merger, Zebra will begin offering lower-cost machines to compete in that segment of the market.

In the competition generated by such convergence, Zebra holds the upper hand, according to John Grangaard, an analyst with GS2 Securities.

"It's easier to go down to the low end if you've already acquired an image of high quality," Grangaard said. It's akin to the success Cadillac would likely have offering a line of economy cars, compared to Hyundai trying to sell luxury models, he said.

Still, he and other analysts say, Zebra should take nothing for granted.

"Zebra is a bigger company with larger margins and ... all the benefits of a larger company, but Eltron is someone to be taken quite seriously," said Nick Pagett, an analyst at William Blair & Co. William Blair's corporate finance division served as a go-between in the merger talks.

"Eltron's management is experienced in extremely competitive industries, like hard disk drives," Pagett continued. "Because of that, they execute extremely well in low-cost design and manufacturing. They've played the game about as well as you can."

Eltron shares initially offered at $6 were trading at around $32 just after the proposed merger was announced in November, but tooking a licking when talks collapsed, falling to around $27, where they remained last week.

To continue the company's growth, Skinner said, Eltron is expanding into related technology. Bar-code printers remain the company's bread and butter, but smartcards for public telephones and plastic-card printing for driver's licenses and identification badges hold increasing appeal.

Skinner said he understood Zebra CEO Edward Kaplan's reluctance to hand over the reigns of a company he had built up over 26 years and which largely created the bar-code industry. "His need to protect his interest was there, as well as certainly my need to protect my interests," Skinner said.