Industries In Transition

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Terry Dorman's parents didn't pay much attention when their 19-year-old son and his friend Peter Bogdonoff set up a silk-screening shop in the Dorman basement in 1975. Nor were they much impressed when the boys discovered that they could apply silk-screening technology to a more commercial product like membrane keyboards.

But they're taking notice now.

By the end of fiscal 1983, Dorman Bogdonoff Corp. in Andover, Mass., #268 on this year's INC. 500, had hauled in more than $7 million from sales of custom keyboards for microcomputers and other electronic devices. Over the past five years, revenues have risen 688.55%, a growth curve likely to continued to rise with the recent introduction of a new, low-cost touch screen.

Dorman Bogdonoff's success, like that of most of the microcomputer-related product makers on the INC. 500, can in large measure be attributed to two key factors: an early start and the ability to shift product lines. As the market for micro-related products continues to mature, both time-tested expertise and flexibility will be even more crucial for companies like Dorman Bogdonoff -- as well as those that manufacture the actual microcomputer hardware.

The reality of an expanding market is a double-edged sword for the three microcomputer manufacturers on INC.'s 1983 list. While sales of personal computers are expected to soar from $8 billion in 1983 to an estimated $30 billion by 1988, the market share available to all but the giants is likely to shrink. Already, according to Future Computing Inc., a personal computer market-research firm, IBM holds 26% of the office PC market, while Apple Computer has 21%; Radio Shack, 13%; and Hewlett-Packard, 6.5%. Digital Equipment Corp.'s and Wang Laboratories's recent entries into the microcomputer arena should bite off another market chunk.

But IBM Corp.'s 1981 introduction of the IBM Personal Computer did more than create a dominant product. By publishing the specifications for its machine, Big Blue brought a focus and a direction to what had seemed a chaotic industry.

"Anybody's crazy who doesn't recognize IBM's presence and decide how he's going to react to it," says Charles Grant, president of North Star Computers Inc. (#392), of San Leandro, Calif. North Star, founded in 1976 as Kentucky Fried Computers, a microcomputer kit supplier, began targeting 5-to-50-employee businesses when, increasingly, their customers began requesting assembled machines.

So far, North Star's reputation for quality, its superior graphics and multiuser capabilities -- along with a loyal dealer network -- have fueled its growth. Many of its distributors and value-added resellers (which sell the product to vertical markets) were once North Star's hobbyist fans. The company hopes to hit sales of $200 million in 1985, but Grant admits success depends on his IBM strategy. All he will say for now is, "We've got that all figured out."

A mix of good distribution, attractive margins, and a solid product earned Columbia Data Products (#119) of Columbia, Md., its initial success. Founded by Bill Diaz in 1975, the company was among INC.'s top 100 private companies for three years running. Then, in 1981, as Columbia was developing a new computer, IBM announced its PC, and Diaz decided his company's new entry should run software written for the IBM micro. Today, all of Columbia's 16-bit microcomputers are PC compatible. The clones include two desktop machines -- a floppy disk and a harddisk model -- and a portable, and Diaz expects to close 1983 with more than $50 million in sales, a 437% increase over 1982's revenues of $9.4 million.

Although some analysts predict a shake-out among the PC-compatible makers, Diaz remains confident. "The market will always be big enough to accommodate half a dozen good-size companies," he says. But to hedge his bets, he has raised $3 million in venture capital; plans a public offering by year's end; and has pursued large retail chains as well as OEMs, a distribution channel that competitors have largely ignored. "We narrowed our vision to a more defined marketplace, which turned out to be the right one," he says. Before, "we were just an also-ran."

Don Lehr, chairman and chief executive officer of IMS International (#487), a Carson City, Nev., manufacturer of multiuser, multiprocessor computer systems, doesn't include a high degree of IBM PC compatibility in his plans for future machines.

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