New Image Founders in the Industry It Pioneered : Dentistry: The firm was a leader in intra-oral cameras, but the growing market attracted competition and profitability collapsed.

CANOGA PARK —  If the notion of a tray full of gleaming dental instruments doesn’t sound appetizing, you’re probably not a dentist. Dentists like their instruments, and some are willing to spend a bundle for them.

So when a warp-speed dental instrument called an intra-oral camera hit the market six years ago, industry experts predicted it would be a blockbuster.

The tiny video camera, mounted in a sleek little wand, allows dentists to project what they see in a patient’s mouth on a video screen so the patient can see it too. New Image Industries Inc. of Canoga Park emerged as the industry leader and seemed to be on a fast track to fortune.

But in fact, New Image’s recent history is a case study of the perils of peddling a hit product.

Between 1992 and 1993, after New Image started selling the cameras, the company’s sales almost doubled to $30.6 million from $16.4 million. Despite the popularity of the intra-oral camera, in recent years the firm’s stock has slumped, it has piled up a cumulative $3.8 million in losses over the past seven quarters, and the president’s office has changed occupants three times.

Today a bruised New Image has dusted itself off for a renewed attack on the market for intra-oral cameras--which can cost from $6,000 to $20,000 and up.

The company is under the command of new chief executive Dewey Edmunds, whose appointment was announced in May. Edmunds was founder and vice president of corporate development at Secomerica Inc., a holding company that operates Westec Security Inc.

New Image did not return phone calls for this story.

But the intra-oral camera market that once seemed so promising has evolved into a tough industry fraught with fierce price competition and ugly patent battles. “A bunch of people have jumped in,” said Claude Berthoin, who is both a shareholder in New Image and chief executive of Video Dental Concepts of Ormond Beach, Fla., a competing firm. “The market is excellent, but the dentists have so much choice, they end up being confused.”

*

Despite this, some observers say the intra-oral camera helps dentists diagnose problems and show patients why certain procedures are needed. But the cameras are a pricey quantum leap past the bent mirrors most dentist still use, and skeptics call them a sales gimmick.

New Image got into intra-oral cameras in 1992 by striking a deal with the man who claims to have invented the first one, Michael Williams.

Before that, the company had traveled a bumpy road in the business of selling computer imaging systems to hair salons. The systems allowed customers to preview themselves with a new hairdo. The systems were expensive, and at first, popular. But in 1991, the company lost $12.4 million on $8.3 million in revenues.

New Image spun off its beauty salon products into a separate company in 1993 and focused on its dental business. It was rewarded with a booming comeback. At the end of fiscal year 1993, the company posted a profit of $5.6 million on $30.6 million in revenues. It seemed the firm was on to a sure thing. “They are a great marketing organization. They did a good job of developing a very fledgling industry,” said Curt Rocca, president of Integrated Dental Technologies, a Sacramento-based competitor.

But the business was so good, everyone wanted a piece of it. Copycats flooded the market with cheaper and cheaper renditions. As the prices of cameras dropped, New Image’s loss for the fiscal year that ended June 30, 1994, was $327,000 on revenues of $31.6 million. Cameras that once cost upward of $30,000 were now costing under $10,000.

Moreover, the stock price had plunged after Dentsply International Inc., now located in York, Pa., abruptly backed out of a deal to acquire New Image in September. New Image shares dropped 35% on the news and have remained low. The stock has been as high as $15.38 in the past year, but it closed Friday at $3.625 per share.

For the first three quarters of the fiscal year ending March 31, the firm lost $3.5 million on revenues of $23.6 million.

*

In its earnings reports, New Image attributed the continuing losses to a $2.2-million restructuring charge and a continuing decline in its profit margin, driven by sinking prices and the fall of the dollar against the yen, which made it more costly for the company to buy parts from Japan.

Despite these pitfalls, the intra-oral camera business still has its believers. Most industry insiders estimate that at most one-third of the more than 100,000 dentists in the country have an intra-oral camera. That leaves “a huge market, and it’s far from being saturated,” said Berthoin of Video Dental Concepts.

Dr. Ronald A. Neff, a Westlake Village dentist, said he bought a $25,000 New Image camera and bookkeeping system last year and believes they signal the future of dentistry. “Any time you can see better, you’ll do better,” he said. Right now, he uses the camera mostly to show patients “before and after” pictures of cosmetic procedures.

But Dr. Calvin Ruthenbeck, a Thousand Oaks dentist who has been practicing for 30 years, won’t be buying one soon. “It’s a sales thing,” he said, adding that many dentists are grasping at ways to increase their business because “people your age and younger keep coming out with no cavities.”

“Dentists are known for gimmicks,” Ruthenbeck added. “They buy a lot of things they don’t need and don’t use.”