Tandem And Cray In Tandem

 

Not long after the first INC. 100 was published in 1979, the presidents of two computer companies on the list spent a week together in Europe making presentations with L. F. Rothschild, Unterberg, Towbin. The two men had much in common beside the INC. 100 and their managing underwriter. They were the same age (39), both were engineers (Rice and Massachusetts Institute of Technology) with MBA degrees (Stanford and Harvard), and both were at the helm of upstart computer companies.

One was James G. Treybig, founder and chief executive officer of Tandem Computers Inc. of Cupertino, Calif.; the other was John A. Rollwagen, soon to become CEO of Cray Research Inc., now in Minneapolis. Tandem had emerged as #4 on the 1979 INC. list, and Cray, #5. The ranking inspired instant rivalry, as well as conjecture as to which company would come out ahead on the 1980 list.

Although both companies eye global markets for their computers, they would never compete head to head. Tandem produces small modular, expandable systems with unit prices ranging from $150,000 to more than $3 million. Cray's forte is high-ticket supercomputers in the $10 million-plus price range. Neither company had any revenues until 1976, when they each generated slightly more than $500,000 in sales. Both executives, however, had five-year plans that stressed market dominance, internal growth, and qualitative goals. Treybig intended to top $100 million in 1980, while Rollwagen was aiming for $60 million. Still, the question was, Which would register the fastest growth rate on the 1980 INC. 100?

Rollwagen, a spunky, curly-headed Minnesotan, tried to goad Treybig into a wager. No less than #1 would do. Treybig, with native Texan confidence and some consideration for his rival's pocketbook, declined even the smallest stakes. A few months later, the 1980 INC. 100 broadcast the results: Tandem Computers, #1 with a five-year sales gain of 9,534%, was the fastest-growing publicly held company in the United States. The runner-up? Cray Research, of course, with a gain of 8,292%.

What neither Treybig nor Rollwagen knew at the time was that their two companies would emerge as the only companies that have appeared on all five INC. 100 rosters. In their achievement, Tandem and Cray represent the essence of emerging growth companies. They are young, innovative, productive, and profitable. The accompanying tables trace the milestones of Tandem and Cray, which are closing out a five-year run at compound annual rates of 89% and 69%, ranking #46 and #74, respectively. At that pace, the two companies will retire from the INC. 100 club. By next year, they will have grown too big to qualify.

NET AS %

OF SALES

Tandem Cray

'82 9.6% 13.5%

'81 12.7 17.9

'80 9.8 17.9

'79 8.8 18.3

'78 13.9 20.4

NET PROFIT

($ mil.)

Tandem Cray

'82 $29.9 $19.0

'81 26.5 18.2

'80 10.74 10.9

'79 4.9 7.8

'78 3.4 3.5

SALES ($ mil.)

Tandem Cray

'82 $312.1 $141.1

'81 208.4 101.6

'80 109.0 60.7

'79 56.0 42.7

'78 24.3 17.2

NUMBER OF

EMPLOYEES

Tandem Cray

'82 3,821 1,300

'81 2,730 1,079

'80 1,630 761

'79 848 524

'78 446 321