FEATURE - U.S. guitar maker draws buyers, cult-like following

By Andrea Shalal-Esa

STEVENSVILLE, Md (Reuters) - Three decades after defying the odds and persuading Carlos Santana to try out his hand-built guitar, Paul Reed Smith's quest for perfect tone is still reeling in enthusiasts from all over the world.

Despite the world economic downturn, his company has built a new multimillion dollar factory and is looking at multiplying revenues while other instrument makers report declining sales.

More than 1,700 guitar dealers and customers traveled to a festive open house at Smith's Maryland headquarters this past weekend to see his newest guitars and tour a factory that turns out over 16,000 handcrafted instruments each year.

The crowd -- which included dealers, doctors, investment bankers and ordinary guitarists -- ordered more than 500 guitars ranging in price from several thousand dollars to as high as $70,000, for a grand total of well over $1 million.

Over the past 25 years, that kind of excitement has made Paul Reed Smith (PRS) Guitars the third largest U.S. electric guitar maker, helping it to squeeze older names Fender and Gibson and capture 40 percent of the high-end guitar market.

Nick Catanese, of Black Label Society, began playing PRS guitars in January, and says there's no comparison with other brands. "They're almost like a work of art," he told Reuters.

Those kind of reviews are good for PRS's bottom line, which is surviving the economic downturn better than most.

This year, PRS expects to match its 2008 revenues of $38 million, while competitors report declines of 20 to 30 percent, and the new factory should allow the company to double its sales once the economy recovers, says President Jack Higginbotham.