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Smith & Wesson Under the Gun: Loses $37.3m in Q2
The Truth About Guns ^ | Robert Farago

Posted on 12/10/2010 5:10:03 AM PST by marktwain

Bloomberg reports that Springfield, MA-based gunmaker Smith & Wesson lost $37.2 million in the second financial quarter. The company racked-up $96.3 million in total net sales in Q2, down $13.4 million or 12.2% from Q2 2010. Drilling down to the trigger-related bits, Smith’s Firearm Division clocked in with net sales of $83.6 million, down $9.8 million or 10.5%, from last year’s Q2 net sales of $93.4 million. As you’d expect, CEO Michael F. Golden downplayed the news . . .

“As overall purchasing of firearms moderated during the quarter compared with the record levels a year ago, total sales came in slightly below our previously issued guidance.” What’s more (or less), “The environment has become increasingly challenging, leading us to the decision to lower our revenue outlook.”

Click here to read the official statement. Meanwhile or alternatively, I’d like to draw your attention to three items.

First, Smith & Wesson sells FAR too many products. ome of the members of Smith’s ever-increasing family of firearms are not that great. Some don’t jibe within the public’s brand expectations. Their existence lowers perceived quality (threatening margins), increases consumer confusion and weakens the brand. The BODYGUARD series, in particular, is generally recognized to be two of the worst pistols Smith has ever made, with terrible triggers and serious quality concerns.

The gunmaker’s corporate masters don’t see it. Like pre-C11 GM, like a rat tapping a bar for an endless line of coke, Smith & Wesson is hooked on the thrill of the new. “Overall, new firearm products remain central to our focus,” Golden’s statement states. “We look forward to unveiling some exciting new models and product line extensions next month at the SHOT Show.”

Smith doesn’t need new products. It needs less products. And it needs to sell a small selection of its world famous wheelguns to non-gun owners. To paraphrase Cambell’s soup ads, “It’s amazing what a revolver can do.” A revolver.

Second, like a pre-C11 GM, Smith & Wesson doesn’t underdstand that there’s no such thing as a core brand. There is a brand. And that brand, Smith & Wesson fans, is firearms. Period. The company’s decision to buy a perimeter security company will end in tears, either by tanking (as it shows signs of doing) or distracting the corporate big-wigs from the business of making guns.

We also remain confident in our business strategy to expand beyond firearms, and we are committed to tapping into the long-term potential of the large and expanding perimeter security market. After the close of the quarter, we successfully expanded our revolving line of credit from $60.0 million to $120.0 million.

See the problem? Which mouth gets fed? And what happens to the passion that informs the Smith brand as factions within the company fight for resources?

Speaking of which, Smith is spending $9m+ to “relocate” Thompson/Center Arms from Rochester, New Hampshire to Springfield, Massachusetts. This for “increased operational efficiencies through the optimization of the company’s manufacturing footprint and increased synergies generated in fixed, marketing, and administrative costs.”

Translation: Thompson/Center Arms will now be a Smith & Wesson sub-brand. Whether they know it or not, they’re euthanizing the blackpowder brand’s vibrant corporate culture. Check this from the Thompson website:

Our precision investment castings come from our own casting facility here in Rochester, Thompson Investment Castings. T/C’s dedication to giving shooters and hunters their best product value begins with the T/C employees. More often than not, T/C employees use T/C products when they head into the fields and woods… products they (and you) can rely on, year after year.

How many of those T/C employees are moving to Springfield? What are the odds that Smith corporate drones will let them take a little time off to go huntin’? Anyway, thing three:

Total company operating expenses, including the $39.5 million expense related to the non-cash USR asset impairment [re: the perimeter security company] and the $3.3 million of expenses related to DOJ and SEC matters, totaled $65.1 million, or 67.6% of sales, for the second quarter of fiscal 2011 versus operating expenses of $23.4 million, or 21.4% of sales, for the comparable quarter last year.

Never mind the write-off, we learn that the DOJ and SEC case against Smith & Wesson for violating the Foreign Corrupt Practices Act (FCPA) lingers. Click here for the gov’s investigation. To refresh your memory on the potential fallout in Springfield, here’s the key excerpt from S&W’s last annual report:

If the SEC determines that we have violated federal securities laws, we may face injunctive relief, disgorgement of ill−gotten gains, and sanctions, including fines and penalties, or may be forced to take corrective actions that could increase our costs or otherwise adversely affect our business, results of operations, and liquidity. We also face increased legal expenses and could see an increase in the cost of doing business. We could also see private civil litigation arising as a result of the outcome of this inquiry. In addition, responding to the inquiry may divert the time and attention of our management from normal business operations. Regardless of the outcome of the inquiry, the publicity surrounding the inquiry and the potential risks associated with the inquiry could negatively impact the perception of our company by investors, customers, and others.

Never mind outside perception. The damage to Smith & Wesson internally could be enormous. Remember: culture eats strategy for lunch. If a corporate culture fails, its strategies are doomed. Hey, whatever happened to that nice little revolver company?


TOPICS: Business/Economy; Culture/Society; Extended News; News/Current Events
KEYWORDS: banglist; bodyguard; gun; smith; thompson
Moving Thompson to Massachusetts! That is a disaster, and really stupid. The corporate bosses are looking at some silly projection of "saving" while ignoring the immense investment in organizational knowledge at Thompson that they are destroying. What Thompson employee will want to move to Massachusetts?
1 posted on 12/10/2010 5:10:08 AM PST by marktwain
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To: marktwain
What Thompson employee will want to move to Massachusetts?

No one in their right mind would move to MA.

2 posted on 12/10/2010 5:14:21 AM PST by ClearCase_guy
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To: marktwain

I have my j-frame .38 Smith revolver that I use for carry, but I stay away from their auto lines. The triggers on the M&P were awful, and the Bodyguard line was atrocious. I’m not sure who they hired into R&D, but they fail.

Springfield and Taurus make much better autos, IMO.


3 posted on 12/10/2010 5:16:31 AM PST by rarestia (It's time to water the Tree of Liberty.)
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To: marktwain
1. Smith and Wesson made lots of money with the fear that obama and the dems would ban guns. That pulled in alot of sales.

2. They need to move a gun friendly state. Eventually, Mass is going to ban or tax them to death.

4 posted on 12/10/2010 5:20:40 AM PST by 2banana (My common ground with terrorists - they want to die for islam and we want to kill them)
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To: marktwain

I did my part:

S&W M&P AR-15

S&W M&P AR-15-22

S&W M&P 357sig Compact

S&W 915

S&W .38 revolver (Police)


5 posted on 12/10/2010 5:21:56 AM PST by airdalechief
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To: marktwain

It almsot sounds like they have a GE-wannabe executive at the helm. Relocate for efficiencies? I love my S&W .357 revolver, it’s a shame they’re going to ruin the Thompson company in the process.


6 posted on 12/10/2010 5:24:30 AM PST by SueRae (I can see November 2012 from my HOUSE!!!!!!!!)
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To: harpseal; TexasCowboy; nunya bidness; AAABEST; Travis McGee; Squantos; wku man; SLB; ...
Click the Gadsden flag for pro-gun resources!
7 posted on 12/10/2010 5:34:13 AM PST by Joe Brower (Sheep have three speeds: "graze", "stampede" and "cower".)
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To: airdalechief
I've got two S & W 38s and a 357 Magnum and I had a semi-auto but traded it in because it jammed too often.

In a real life situation, once is too often, but even on the range, I couldn't get through two or three sessions of practice without jamming.

None of my revolvers ever jammed, I've had misfires {very rare} but that didn't prevent the next round from firing.

8 posted on 12/10/2010 5:34:22 AM PST by USS Alaska
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To: marktwain
Smith is spending $9m+ to “relocate” Thompson/Center Arms from Rochester, New Hampshire to Springfield, Massachusetts.

Why would Thompson/Center sell out to S&W in the first place - much less get moved to anti-gun and business unfriendly Taxachusetts? Their brand stands on it's own and their product line is excellent and innovative with a special niche. It surely can't be their manufacturing expenses will be less or their corporate culture will be improved.

9 posted on 12/10/2010 5:34:31 AM PST by Gritty (Americans have the right and advantage of being armed – James Madison)
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To: marktwain

To bad about Thompson. Love there designs, but I fear the brand will die now.


10 posted on 12/10/2010 5:42:27 AM PST by redgolum ("God is dead" -- Nietzsche. "Nietzsche is dead" -- God.)
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To: rarestia

I bought a S&W M&P 9mm, and I actually kind of “like” its trigger.

Keep in mind, it’s a striker fired plastic gun.

Compare it to a Glock, or a Sig p250.

It takes some getting used to if you’re used to something like a 1911, but once you do it’s fine.


11 posted on 12/10/2010 5:49:42 AM PST by Pessimist
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To: marktwain

Unbelievable.

If they can’t show a profit in this environment, they’re toast.

Sales may be down year over year, but prices are still strong.


12 posted on 12/10/2010 5:50:56 AM PST by Pessimist
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To: USS Alaska

the only S&W I have iss a 1st model Hand ejector in .45.
All my other revolvers are Colt. I never have liked autos in general and S&W’ in paticular. Tha only Auto is the M1911.


13 posted on 12/10/2010 5:54:09 AM PST by barb-tex (What else did you expect from the likes of 0? BTW, What ever happened to Rhodesia?, Oh, yes, Zimbabw)
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To: USS Alaska

My 649 Bodyguard in .357 magnum is top shelf sweet. I understand they are selling a compact auto .380 pocket pistol under the “Bodyguard” name that is iffy. Sad.


14 posted on 12/10/2010 5:58:07 AM PST by pingman (Price is what you pay, value is what you get.)
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To: marktwain
I own 2 S&W's. An Escort 61-3 and a 19. Both older guns.

S&W just doesn't make anything that I have a pressing need for or would want to "upgrade" to. The .460 is about the only thing I can think of, but that would be more for "toy" value than anything else.

15 posted on 12/10/2010 6:00:13 AM PST by Dead Corpse (III, Alarm and Muster)
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To: rarestia

Agree! Springfield XD .40 Sub Compact is an awesome weapon!


16 posted on 12/10/2010 6:03:56 AM PST by Renegade
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To: airdalechief

How do you like the S&W M&P AR-15-22? I think I want one.


17 posted on 12/10/2010 6:04:27 AM PST by caver (Obama: Home of the Whopper)
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To: Dead Corpse

My S&Ws are a 7-shot .357 686 and a five shot.38 snubbie. They will both be in the family for generations to come.


18 posted on 12/10/2010 6:06:04 AM PST by wtc911 ("How you gonna get down that hill?")
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To: marktwain

I am a Smith & Wesson wheel gun collector and use a M&P45 daily. I love their products for the most part. In my opinion Smith & Wesson should do several things:

1) They should move their business to a right to work, gun friendly state that won’t tax them to death.

2) S&W should do away with the ridiculous internal locks on their revolvers except for the less free states that require them such as California, Illinois and Massachusetts.

3) S&W has done a good job of obtaining the police market with the M&P lineup. Build on that success. Be aggressive for military contracts as well.


19 posted on 12/10/2010 6:09:29 AM PST by canucksvt
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To: marktwain

I currently do not own any Smiths. I own several Rugers and I was thinking of trading my Redhawk for a Smith 629 but they want around $800.00 for a Smith so I decided to just keep the Redhawk.


20 posted on 12/10/2010 6:14:30 AM PST by BobinIL
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To: Renegade

That’s the exact pistol I use for carry on long days. I love it.


21 posted on 12/10/2010 6:17:25 AM PST by rarestia (It's time to water the Tree of Liberty.)
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To: canucksvt
There's nothing finer than S&W wheelguns from the ‘50s and ‘60s. Gimme a Kit gun any time.
22 posted on 12/10/2010 6:18:25 AM PST by Eric in the Ozarks (Impeachment !)
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To: canucksvt
“2) S&W should do away with the ridiculous internal locks on their revolvers except for the less free states that require them such as California, Illinois and Massachusetts.”

I own nine S&W guns, none have this STUPID feature, and I'll never buy a gun from ANYBODY that has this stupid “feature”.

I always say I own “classic” S&Ws. Any as far as the comments about semi-autos, my 10mm (1065 I think is the number) has had several thousand rounds through it without a jam, and has been the last thing several dozen feral hogs ever heard in this life.

23 posted on 12/10/2010 6:20:09 AM PST by I cannot think of a name
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To: marktwain
First, Smith & Wesson sells FAR too many products

Need to heed some of Chuck Noll's advice. When you find yourself struggling, do less, not more.

24 posted on 12/10/2010 6:23:20 AM PST by IamConservative (Never kick a fresh turd on a hot day... Truman)
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To: Joe Brower
Bean-counters running the business? There's a solution to that. It's like a case of acne, it can be cleared up just by depriving the bean-counters of chocolate and french fries. With a little incentive they'll go count someone else's beans.

Hostile action from DOJ?

"Very bad news", and not really hard to figure out at all.

No further comment...

25 posted on 12/10/2010 6:27:32 AM PST by OKSooner (Obama confessed "his muslim faith" on the George Stephanopolous show on September 7th, 2008.)
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To: marktwain

Been following Smith for quite some time. They always seem to have these ups and downs. Their bacon was saved in the late 1800’s by big orders from Russia. They did OK in the heyday of the revolver, the 20’s and 30’s, but were in bad shape following WWII despite producing a ton of Victory models. Carl Helstrom got them back into shape in the 50’s and 60’s, but things got sketchy once again (particularly in quality) during the Bangor Punta days. Then the fiasco with British ownership and the Clinton deal nearly killed them off.

A couple observations. They make too many products. I’ve never met anyone who can remember the number designations for all the 2nd and 3rd generation autos. Their record with long guns is abysmal, rifles from Howa, pump and auto shotguns, and their recently made Turkish double guns. Their A-15 line is good, but as with their 1911’s, they were jumping on a bandwagon that was already well down the road. Crowded fields, and they can’t compete in price with some makers, or quality with the Les Baers. So they’re stuck in the middle.

They always seem to be a bit late to the party, as with the polymer guns. The M&P is OK but the Sigma stunk on ice. The new bodyguards are “me too” with Keltec and Ruger for the small .380 and the plastic revolver.

Their limited run guns, especially from the Performance Shop are very good, but pricey. They are more “collectibles” than working guns. They seem to make a big splash with innovative items, such as the 329PD lightweight .44, the 500 and 460 Magnums, but these are not items that sell in quantity. Their J frames have sold well in the past year or two, but so has everything that goes bang. Even in a steel frame, these are not “fun guns”.

Smith needs to find itself, and not just try to reinvigorate a moribund and scattered business model by mergers and acquisitions. All that usually does is kill the entity being acquired.


26 posted on 12/10/2010 6:34:53 AM PST by Tijeras_Slim (Pablo lives jubtabulously!)
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To: Joe Brower
Well, okay I do have further comment.

This is the first I'd heard of DOJ messing with Smith. This is the first I've heard of it. The agenda is no doubt to put Smith pretty much out of the business of making firearms just as Klinton "persuaded" Colt back in his time.

Time for *ahem* someone with some stroke to help Smith stand up to DOJ for at least two years until Holder is gone.

27 posted on 12/10/2010 6:37:06 AM PST by OKSooner (Obama confessed "his muslim faith" on the George Stephanopolous show on September 7th, 2008.)
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To: wtc911

S&W Model 642 for CCW and an old Model 19 Combat Magnum for things that go bump in the night.


28 posted on 12/10/2010 6:42:01 AM PST by sarge83
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To: marktwain
and with the likes of their new .380 Bodyguard i can see why...

i went to my gunshop with the express intent of buying one until i picked it up.

the gun is everything i wanted EXCEPT... the LASER is a hard switch on the side of the frame that would NOT be easy to turn on in a high stress situation nor do i always want it on!!!

it should of been like the CRC site is, a momentary switch on the front strap is where it is natural and only on if you squeeze it

i tried multiple times to feel comfortable with it but to no avail, so i left without it and my .380 Ruger/CRC still in my pocket.

damn shame...

29 posted on 12/10/2010 6:50:26 AM PST by Chode (American Hedonist - *DTOM* -ww- NO Pity for the LAZY)
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To: Chode
but i love my M-59 and my M-4516...
30 posted on 12/10/2010 6:52:33 AM PST by Chode (American Hedonist - *DTOM* -ww- NO Pity for the LAZY)
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To: sarge83

Who could ask for more?


31 posted on 12/10/2010 6:56:12 AM PST by wtc911 ("How you gonna get down that hill?")
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To: I cannot think of a name

I’m a fan of the “classic” revolvers mentioned and S&W third generation autos and the 10mm in particular. I dislike the revolver lock and have but one, a 500 that remains unfired although I have the ingredients for hundreds of rounds.


32 posted on 12/10/2010 7:06:58 AM PST by mcshot (The golfing dude's grandmother knows where he was born - ask her.)
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To: Renegade; rarestia
Agree! Springfield XD .40 Sub Compact is an awesome weapon!

It is a thing of beauty and my next hand-gun purchase!


33 posted on 12/10/2010 7:59:46 AM PST by SoConPubbie
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To: Pessimist

S&W makes good revolvers, but their autos are a POS.


34 posted on 12/10/2010 8:00:37 AM PST by Roklok
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To: marktwain

Someone needs to do to Smith and Wesson exactly what needs to be done to the Obama Administration, flush it.


35 posted on 12/10/2010 8:10:11 AM PST by B4Ranch (Do NOT remain seated until this ride comes to a full and complete stop! We're going the wrong way!)
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To: marktwain

Guns last at least 100 years if cared for. There are just so many guns people can add to their stock. The danger is in the Libs outlawing ammunition.


36 posted on 12/10/2010 8:31:41 AM PST by pabianice
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To: Pessimist

Smith and Wesson cozied up to Clinton during his adm...and a lot of people haven’t forgotten...They decided to go along with some dumb rule Clinton put out and I remember the posts that said at the time they would never buy a S & W again....they took a beating at sales for a couple of years...seems lots of people have forgotten that, but a lot of people still won’t touch their guns...


37 posted on 12/10/2010 8:33:20 AM PST by goat granny
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To: mcshot
“I’m a fan of the “classic” revolvers mentioned and S&W third generation autos and the 10mm in particular.”

My good old 629 was a favorite for many years. Unfortunately the 10 spoiled me when hunting hogs in really dense brush. Can't buy any proper loads for it anymore and I'm too lazy/busy to get into hand-loading.

38 posted on 12/10/2010 8:37:01 AM PST by I cannot think of a name
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To: marktwain

A down quarter is inevitable after the Obama driven buying bubble burst. People could only buy so many guns.


39 posted on 12/10/2010 8:38:02 AM PST by ctdonath2 (+)
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To: Joe Brower
I've had a S&W CS9 for several years and it works fine:


40 posted on 12/10/2010 9:58:07 AM PST by blackie (Be Well~Be Armed~Be Safe~Molon Labe!)
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To: marktwain


Speaking of which, Smith is spending $9m+ to “relocate” Thompson/Center Arms
from Rochester, New Hampshire to Springfield, Massachusetts.

Have the “suits” at Smith and Wesson never heard of Texas, Florida,
or even Oklahoma and Louisiana?
Moving into Taxachusetts is going to get discussed in graduate business
schools in the future as a prime case study in “corporate suicide”.

H-LL, talented but low-IQ athletes know enough to leave economic taxation hell-holes
like California for Texas and Florida!!!


41 posted on 12/10/2010 10:16:36 AM PST by VOA
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To: Tijeras_Slim

What you said.....agree 100% !

Albeit my Smolt / Smython collection is growing I love S&W wheel guns.

Stay Safe....Merry Weekend Slim !


42 posted on 12/10/2010 10:25:27 AM PST by Squantos (Be polite. Be professional. But have a plan to kill everyone you meet)
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To: pabianice
There are just so many guns people can add to their stock.

Heretic! ;)

43 posted on 12/10/2010 10:30:25 AM PST by Tijeras_Slim (Pablo lives jubtabulously!)
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To: Squantos

Stay safe!


44 posted on 12/10/2010 10:35:09 AM PST by Tijeras_Slim (Pablo lives jubtabulously!)
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To: caver

I like the AR-15-22 really well. I’ve put about 500 rounds thru it with a couple of jams at first. I attribute that to breaking in. No jams in the last 4 or 5 magazines.

For sighting, I have an EOtech and out to 100 yards, I’ll hit you in the head every time - calm wind of course !!

I only shoot CCI Mini-Mag 22LR thru it. It’s a good round.

Price is right.


45 posted on 12/10/2010 2:16:09 PM PST by airdalechief
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To: Roklok
S&W makes good revolvers, but their autos are a POS.

Which auto do you own?

I've been nothing but impressed with my M&P40

The Sigma series is just made for a down market that competes with Hi-Point and the like.

46 posted on 12/10/2010 2:46:50 PM PST by Last Dakotan (Hunting - the ultimate in organic grocery shopping.)
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To: Last Dakotan

A decade ago I won a 457 at a match...couldn’t sell that POS fast enough. About five years ago I gave the S&W1911Sc a try. Then another. Then I switched to M&P pistols for carry. Then I started buying their ARs. More recently bought the MP-15 .22 rifle. (Nothing but fun!) I’ve certainly done my part!

I think the author of the piece nailed it...they’re leaving their core competency.


47 posted on 12/11/2010 1:11:14 PM PST by IGOTMINE (1911s FOREVER!)
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To: airdalechief

Cool! I seen one at a big gun show for something like $469.00. That didn’t sound like a bad price?


48 posted on 12/11/2010 3:32:49 PM PST by caver (Obama: Home of the Whopper)
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