Computer peripherals push Quadram onto center stage
Leland Strange knows that being at the right place at the right time isn't enough. In late 1981 Mr. Strange, a college marketing professor, and Tim Farris, an engineer, decided to make accessories for the recently unveiled IBM personal computer. The IBM machine became a runaway hit and now the two-year-old accessory company, called Quadram Corporation, has 260 employees, 30 products, and annual sales in the $60 million range. ''That is mind-boggling growth,'' notes Thomas Lord, vice-president of Johnson, Lane, Space, Smith & Co., an Atlanta-based brokerage firm. He expects Quadram Corporation sales will grow 25 to 30 percent annually during the next three years.
But torrid sales are no guarantee of success in the fickle computer industry. Ealier this month, for example, Osborne Computer Company, the early leader in portable computers, furloughed most of its employees and filed for protection under Chapter 11 of the federal bankrupcty law.
Quadram has a two-pronged strategy to avoid becoming a high-tech flash in the pan. First, Mr. Strange says the company tries to ''tightly couple'' new product engineering to what dealers say personal computer owners want. Rather than sell products through wholesalers, as is traditional in the computer business, Quadram sells directly to retail stores.
This single-tier distribution strategy takes more time to set up, but it offers ''real close communication with the person who sells,'' Strange says. In addition, the approach makes it harder for Quadram to lose retail shelf space to competitors.
While emphasizing marketing, Quadram also aims to be the low-cost producer in the computer enhancement industry. Quadram ''is the low-cost producer of computer memory (accessories),'' Mr. Lord says. To maintain this advantage, it makes most of its products in house, at a new 60,000-square-foot office and production facility here. Other accessory companies farm out much of their production work.
Quadram's products include a circuit board that lets an IBM machine run Apple instructions, or software. Another board adds to the IBM machine's memory and lets it perform additional functions like keeping time and running a printer. This so-called ''Quadboard'' is the company's most important product.
Being the low-cost producer allows the company greater pricing flexibility. Last spring, for example, Quadram cut the price of the Quadboard from $595 to $ 395, forcing competitors to follow suit.
''You don't want to set a price umbrella where 50 people can come into the field and do what you are doing,'' Strange notes. He serves as Quadram's marketing vice-president and as president of Intelligent Systems Corporation, a publicly traded company that purchased Quadram last December.
To maintain a price advantage, and also to avoid the financial mismanagement that has hurt other computer companies, Quadram is bringing in an additional tier of managers, including a new financial vice-president hired away from Continental Telephone Company.
Quadram has ''pulled together a much better (management) team'' than Osborne, notes Thomas Richter, a vice-president at the Atlanta brokerage firm Robinson Humphrey/American Express. ''And the new financial man will help improve the control system'' at Quadram.
At the same time, Intelligent Systems, Quadram's parent, ''seems to have curbed losses'' at two other divisions, Mr. Richter says.
Despite a well-thought-out management strategy and rapid sales growth, Quadram could still face significant problems. At least 50 percent of its sales are aimed at owners of the IBM personal computer, with remaining sales targeted at owners of Apple, Texas Instruments, and other brands.
So a change in IBM technology or marketing tactics could be highly disruptive. ''IBM can always change what they do very quickly,'' Strange admits. ''They don't have to be rational in their decisionmaking, so you can't plan on (any one course of action).'' For example, IBM could decide to make it more difficult to connect non-IBM accessories to its computer. Or the giant computermaker could move more aggressively into accessory production and sales.
''IBM is always a risk in terms of their action,'' Richter notes. But he adds that Quadram has a high degree of maneuverability. ''Quadram moves much faster than IBM can move,'' he says.
Analysts think that for the time being, IBM will concentrate on turning out as many personal computers as possible, since demand outstrips supply in many areas.
Competitive moves against accessory suppliers will come later, if at all. ''In the next nine months I am not looking for IBM to make drastic changes'' that will affect Quadram, Mr. Lord says. ''But IBM will make significant product announcements in that time frame.''
To cope with unexpected design changes, Quadram now designs all of its circuit boards using computers so that changes can be made ''very rapidly,'' Strange says.
Quadram could meet tougher price competition by moving production abroad. ''We look at it all the time. Someone is going to Taiwan on Monday,'' Strange says. But its products are changed frequently, so for the moment it makes more sense to keep assembly operations just outside Atlanta.
There are a growing number of high-tech companies in the area. According to a recent study by the Federal Reserve Bank of Atlanta, Georgia got a late start in the race to secure high-tech companies and has been ''running a distant third behind Florida and North Carolina.'' Still, over 33,000 people in metropolitan Atlanta are employed in some 150 high-tech companies.
Mr. Strange's biggest concern is not action by IBM but rather a change in attitude within Quadram. ''I am most afraid we will get comfortable with what we have, which is very nice, and will forget that every day we have to get up and think of something new.''