Adversity Drove Delta Computec to Diversity: Now the Company Is Thriving

Abstract

In an era when computer manufacturers are invading the turf once held by independent maintenance companies, Delta Computec continues to expand. The computer maintenance company reported record second quarter earnings. Revenues for the quarter were up 45 percent to $802,724. Net profit for the quarter was $39,623 or $.01 per share compared a loss of $30,261 or $.02 per share for the same period last year. Founded by Darryl Sanford in 1978, Delta Computec fell on hard times during the mid-1980s -- a victim of overexpansion, its current chief executive, Rodger Loomis, claims. (excerpt)

In an era when computer manufacturers are invading the turf once held by independent maintenance companies, Delta Computec continues to expand. The computer maintenance company reported record second quarter earnings.

Revenues for the quarter were up 45 percent to $802,724. Net profit for the quarter was $39,623 or $.01 per share compared a loss of $30,261 or $.02 per share for the same period last year.

Founded by Darryl Sanford in 1978, Delta Computec fell on hard times during the mid-1980s -- a victim of overexpansion, its current chief executive, Rodger Loomis, claims.

Yet in its latest move, the $3.5 million company is swallowing up two competitors with a combined volume of $5 million, almost tripling Delta's size. So overexpansion seems unlikely to be the cause of the company's past troubles.

The problem, beyond over-expansion, according to Loomis, was the increasing competition from original equipment manufacturers. Early on, equipment manufacturers repaired only their brand of equipment in a computer system. In that environment, Delta was able to gain a competitive edge on the OEMs by taking responsibility for entire systems, which often were made up of several brands of equipment.

But as the market for new computer equipment became oversaturated, computer maintenance became attractive to original equipment manufacturers as another source of revenue. The manufacturers began to take responsibility for the whole system -- their own equipment as well as that of other manufacturers.

Still another problem for Delta was its focus on repairing only systems incorporating Data General equipment, Loomis said. When Data General started to loose market share, Delta began to suffer financially.

Loomis, who was one of the principals in the original company, returned in 1987 after having left the firm. The headquarters moved back to Syracuse after a stint in Rochester, and expenses and unprofitable branch offices were cut. Efforts were "refocused," because, according to Loomis, the company needed to acquire more sales, not more territory, especially because it had become a publicly-held company.

The company embarked on a program of repairing other brands by hiring personnel with experience in popular brands, Loomis said.

Acquiring other computer repair companies also figured into Loomis' strategy. By incorporating other company's operations into Delta's, Delta gained the expertise of the other companies and the chance to reduce costs through increased economies of scale, plus added revenues.

The two recently announced acquisitions illustrate this strategy. The acquisitions give Delta new expertise and hence, new markets -- personal computers and laser printers. Late in May, Delta took over operations at RTK Computer Services Inc, of Middlesex, N.J. services PCs. The other acquisition, R & M Associates, of Hackensack, N.J., services laser printers in the metro New York, New Jersey and Philadelphia markets, and will become a wholly-owned subsidiary, Loomis said.

Financing was provided by the placement of $1 million worth convertible subordinated debentures, and assumption of trade payables and prepaid contracts by Delta, the surviving corporation in the transaction.

Loomis says he wants to establish a stronger presence through deeper penetration in the Northeast, not to spread out further geographically. "We are already spread out far enough,' he asserts. In addition to Syracuse, Delta has offices in Dallas, Houston, New Orleans, Miami and Atlanta.

Though Loomis sees competition in many places --from local independent organizations and manufacturers, he insists Delta can survive. Loomis contends that manufacturers sometimes have a "hidden agenda" as they repair equipment --that manufacturers want customers to buy more of their brand. "A lot of customers resent that strong-arm technique," he says. But as an independent operation, Loomis commented, Delta has no such motivation.