CompuAdd Gets Ready for a Fight

WILLIAM HAYDEN has a problem. Major computer manufacturers such as IBM, Compaq, and Digital Equipment Corporation (DEC) have decided that it's worth their time to compete against makers of low-priced "clones."

Mr. Hayden founded and is chairman and sole owner of one such company, CompuAdd Corp. in Austin. In 10 years CompuAdd has grown to more than $500 million in sales of personal computers and ancillary products.

"Before, it was easy," Hayden says. "You could pick on IBM, you could pick on Compaq, based upon pricing, better service, better warranty. You could tear them apart."

No longer, he predicts. "Everyone else will achieve the standards that have been established by the mail-order companies. DEC has achieved that almost overnight."

When it comes to pricing personal computers, soon "we'll all be sitting together within $200 of each other." And therein lies his problem. Cut-rate computer firms "have to figure out what's the next level," he says. "How do we differentiate ourselves from these guys with billions of dollars to do whatever they want to do in this marketplace?"

So far, Hayden has spun off CompuAdd Express to sell to people who need the lowest price but no follow-up service. CompuAdd sells to those who want more and will pay more. And it offers a variety of channels: direct sales, a chain of stores, a European presence. Hayden says that he will stick to the markets and sales channels that make money and abandon those that don't.

"This is definitely the year you can't make a mistake," he says.

He has made mistakes before while running CompuAdd, his first management job. The company might be "a multibillion-dollar player" otherwise, he concedes. For instance, Hayden says he knew in 1987 that the "superstore" was the future of computer retailing. "We just didn't know how to do it."

Further, Hayden watched and waited while cross-town rivals switched from selling only peripheral products to computers as well. "None of us had any idea how hot that market was going to be," he says. Now computers are half of CompuAdd's sales.

If Hayden can hold his own against the industry giants, it will be by the means that have carried him this far: horrendous hours, caged costs, excellent service, fast response time, and the daring to try new ideas but quickly back out of dead ends.

"Many times we've made a stupid decision or mistake that will cost us a lot of money," he says. "But we're not losing anybody's money but my money, so it doesn't really bother me."

"It bothers me," Hayden corrects himself, "but it doesn't possess me."

Hayden was born and raised in the farming community of Floresville, Texas, 30 miles southeast of San Antonio. His father, a mechanic who worked on heavy equipment, sparked Hayden's interest in engineering. Hayden still dresses for work in a shirt and slacks. He tried a Mercedes but preferred a Fort Bronco. He's kept the same friends as before and still teaches Sunday School.

After graduating from the University of Texas in Austin, Hayden went to work at the Texas Instruments (TI) office in town. Life in a big corporation didn't really suit him, though. Hayden vowed to leave before his corporate badge "turned yellow," a reference to the ID color for employees with 10 years of service.

One day in 1981 Hayden saw his new yellow badge on his boss's desk and promptly resigned. Hayden had no idea what to do next, but he had been moonlighting in Austin's then-booming real estate market.

It was a demanding sideline: During his last year at TI, and with his wife pregnant, the family moved four times. By "flipping houses," Hayden had turned $15,000 into $100,000. With that experience to build on and capital to invest, he started a real estate publication. When its potential proved limited, he sold the publication in September 1982, focusing on another business that he had started in April: mail-order computer parts.

Such businesses had a reputation for being the underside of the industry because of their bad customer service. For a while Hayden was embarrassed to tell his parents what he was doing. Nonetheless, the business was zooming. Hayden, who had worked in quality control and consumer products at TI, drove CompuAdd to deliver high-quality service and fast response time while keeping prices low.

Although the company has grown and thrived, CompuAdd is still a low-cost, high-production environment. Hayden frowns on memos, meetings, and electronic mail, preferring face-to-face communication. There are no secretaries, no vice presidents, no plush offices.

Hayden sets goals, then lets his staff achieve them in their own ways. Giving staff members independence has paid off. When Sears Roebuck & Co. asked CompuAdd to bid on a job to supply the retailer with 28,000 computer-based cash registers, CompuAdd wasn't even in that business. Hastening to get a prototype ready, one engineer needed a $50,000 machine and charged it to a credit card. In early January, CompuAdd announced that it had won the $53 million order, its largest ever.

An even bigger fish has slipped off the hook for the moment. The Air Force had made a fast-track selection of CompuAdd as one of two computer vendors it would use. The contract would have been worth $400 million, but the government reopened the competition after other computermakers complained.

"They were unprepared," says Judy Bitterli, director of corporate sales. "We will re-win it" when the vendors are selected again in March, she says.