Small printer firm filling a gap for home computer buffs
Last fall David Horn bought a $169 Commodore Vic-20 computer for his family. He and his two stepdaughters are using it to learn how to program. But Mr. Horn, a librarian, also wants a printer.
He doesn't need anything fancy. ''I just want to use it to have a written copy.''
The problem is that when he looked last year, he couldn't find any printers for less than $500. ''I can't see spending four times what I paid for the computer,'' he says. A year later he still hasn't bought one.
In business, one person's problem is another's opportunity. That's the way Syed Zaidi saw it in 1980, when he started Alphacom Inc., a California printer company with products in the $100-to-$200 range.
Alphacom got its big break last October, when it caught a $54 million, multiyear contract with Timex Computer to supply a printer retailing for $99. Last year, Timex won 20 percent of the home computer market.
That's the only manufacturer Mr. Zaidi is interested in. ''We only needed one big one. Profit margins are too low (when you sell to manufacturers),'' he says.
Instead, he wants to sell his printers directly through the mass retailers. Commodore-compatible printers from Alphacom now sell through Toys ''R'' Us, and in September new Alphacom printers will go on sale at J. C. Penney, Bamberger'scq (a division of Macy's), Caldor, and a few K marts. Alphacom's $3.4 million revenue-year in 1982 is likely to soar to $35 million this year.
Investors have grabbed for the Alphacom opportunity. In April, Alphacom was offered $9 million by well-known venture capitalists; it took $6 million, still more than it needed. There is no financial pressure to take the company public, Zaidi says, and hedges the question of whether it will issue stock with a ''maybe yes, maybe no.''
Outsiders say Zaidi is not exaggerating Alphacom's growth predictions. ''This idea of a tenfold increase is . . . right on,'' comments Laura Stuart, a research analyst studying the printer market for International Data Corporation. ''Three years ago, a new distribution channel opened up - the computer store. Now we are going to the mass market . . . and a couple of sneaky (i.e., smart) companies, like Alphacom, are going to get in there, figure it out, and make a lot of money from it.''
The world of printers is divided into two types. According to Future Computing, a Texas research firm, daisy-wheel printers average $1,970 and work on the typewriter principle - characters are pounded onto paper. Dot-matrix printers average $892 and form characters by lining up little dots. The dots can either be struck on the paper by an impact printer, or they can be applied on a special kind of paper with a thermal printer. Thermal is the least expensive, but the text is readable (though not of letter quality), and the speed is good ( 80 characters per second).
The Alphacom printers are all thermal. The products coming out in September can be used with Commodore, Apple, Atari, Tandy, and Mattel computers. The 40 -column-width printer (half typewriter size) will sell for $120, and the 80 -column one, at $170. In addition to the printers, the consumer has to buy the cable that links the printer with the kind of computer he has. These hookups start at $40.
If the low end of the market is so huge, how come no one has entered it in a big way? Ms. Stuart points out that it was only last Christmas that the home computer market really took off and just last winter and spring that home computer prices dropped into the $50-to-$150 range. ''It's a completely new market,'' she says.
Printermakers have been kept plenty busy with the business market. Okidata Corporation, a major player in the printer business, aims its products at computers in the $1,000-to-$3,000 range. This year it will more than double its revenues - to $150 million.
''No one anticipated this kind of growth,'' says Bernard Herman, president of Okidata. He adds that it will come out with products next year to attack the low-end, mass market.
Research analyst Laura Stuart also explains that even though printer prices have dropped dramatically in the last year, they haven't come down fast enough. For instance, the choice for Texas Instruments computer users so far is a $750 printer. ''We have a $100 computer and a $750 printer. That doesn't go too well, '' says David Leonning, a TI spokesman.
''Construction of printers is labor intensive, and price reduction doesn't come easily,'' says Ron Ockander, sales director at Epson America Inc., the leading printermaker. Epson considered entering the low end of the market, he says, but it didn't want to cut quality corners.
Alphacom dodges price problems because it produces thermal printers instead of more expensive types, and because it manufactures in Taiwan and Hong Kong. Zaidi says there is no reliability problem, quoting a 0.3 percent return rate for bad products.
As Alphacom grows, Zaidi sees only one problem that could get in the way. ''Keeping up with demand will be a big task.'' Already, parts shortages have put the company two months behind schedule.
Zaidi doesn't seem worried about competition. His closest competitor, Star Micronics in Dallas, sells dot-matrix printers in the same price range to computer specialty stores. Now it's considering mass marketing. Printer package deals, such as Coleco's Adam computer, are likely competition.
''We are six months to a year ahead of our competition,'' Zaidi says. The company will do well ''as long as we keep developing and innovating our products.'' Besides, he says, ''the home market is too big for us anyway.''