Richard Thalheimer, Founder of Sharper Image, Talks for the First Time About His Ouster

Joe Williams, who as the company's longtime former security chief was among the occasional visitors, recalls the lab as "where the inner child could come out in every man, with gizmos blinking and whirling. The only thing missing were white coats and propeller hats."

The lab (which the new regime disbanded after Thalheimer's departure) was responsible for some 300 patents. It rolled out more than 100 products, from the fanciful to the bizarre. Some, including a fogless shower mirror, "sound-soother" white-noise machines, and a battery-powered line of nostril-hair trimmers, were phenomenally successful. Others, such as an anti-snoring wristband, with a snore-detecting microphone that triggered a mild electric shock to wake up the offender, were somewhat less so.

But nothing came close to the triumph of the first-of-its-kind air purifier, with its ability to move air silently while trapping airborne particles.

The principle upon which it is based, called electrostatic precipitation, had been known, in theory, for more than a century, but it had never been applied to a consumer product. That changed with a struggling inventor named Jimmy Luther Lee, who approached Taylor in 1995 with an electrostatic box the size of a cigarette pack that he hoped to introduce as something to keep computer monitors dust-free. Taylor saw air-purifying possibilities.

At Taylor's urging, Thalheimer staked Lee the princely sum of $25,000 to engage in further research. Lee ultimately earned more than $10 million in royalties from The Sharper Image, those familiar with the matter say. (Lee, who heads a product development company in Rohnert Park, did not respond to interview requests.)

The Breeze was an instant sensation. After an ad for the purifiers inadvertently appeared prematurely in SkyMall, the in-flight catalog, the company booked 2,500 orders before the first shipment had even arrived from China.

Yet the same blockbuster product that pushed Sharper Image revenues into the stratosphere would also figure prominently in Thalheimer's losing control of his cherished company, and in its lingering financial woes.

Consumer Reports dinged the Ionic Breeze as "ineffective" in 2002, ranking it dead last among 16 air purifiers. The magazine concluded that the Ionic Breeze — of which the company by then had sold more than 3 million since 1999 — had performed poorly at removing dust and smoke particles from the air.

The purifier took another hit in 2003, faring only slightly better in follow-up testing in which the magazine moved it up a notch to rank next to last. Still, the buying public didn't appear to care. Sales of the purifiers were skyrocketing, constituting nearly half of Sharper Image profits, and helping to make fiscal 2003 its best year ever, with $750 million in revenue.

But Thalheimer seethed at the negative reviews and the company filed a lawsuit attacking the magazine's test procedures as unfair and accusing it of negligently disparaging the product. Owing to the publicity from the lawsuit, sales of the purifiers tapered off, even as competitors, including Home Depot, Radio Shack, and shopping mall rival Brookstone, flooded the market with imitators.

In 2004, a judge dismissed the lawsuit as frivolous, and The Sharper Image was forced to fork over $525,000 to cover the magazine's legal fees. Thalheimer now concedes the lawsuit "was a strategic mistake," although he still stubbornly insists he was in the right.

If things seemed bad after the lawsuit was tossed out, they got worse.

A new study by Consumer Reports in 2005 determined that a model of the Ionic Breeze (along with similar air purifiers produced by four other companies) was not only ineffective, but also released harmful levels of ozone — something the company disputed, even as it reduced ozone emissions in subsequent versions of the product.

As a result, besides slumping sales and a severely depressed stock price, the company also was hit with competing consumer class-action lawsuits aimed at the purifier.

Even now, Thalheimer asserts that the venerable consumer publication's ozone findings were the result of a "vendetta" for his company's challenge to the magazine's credibility by suing it, something that Consumer Reports attorney Steve Williams of Burlingame dismisses as "preposterous."

"That's my opinion," Thalheimer insists. "It may be right, or it may be wrong. But that's what I believe."

Right or wrong, the demise of The Sharper Image's most successful product (which still accounts for nearly 15 percent of the company's revenue) led to shareholder disenchantment with Thalheimer.

In the spring of last year, the Knightspoint Group, a dissident shareholder group, acquired 13 percent of the company's stock and made a play to seize control of its board to oust Thalheimer and replace him with Jerry Levin, the veteran executive whose résumé includes stints as chief executive at Revlon and the Sunbeam Corporation (now a subsidiary of Jarden Corporation).

To avoid a proxy fight, Thalheimer offered a compromise: The company would drop four members from the board (including Thalheimer's then-80-year-old father) and expand the board to include three members from Knightspoint (including Levin), as well as three independent members.