Terms Of Endearment

By selling peace of mind to Fortune 500, Selecterm has been able to survive a series of shakeouts in the volatile terminal market.

It was Thursday when executives of America's largest apparel manufacturer called Selecterm Inc., the Danvers, Mass.-based "third purty' supplier of personal computers and terminals. The Fortune 500 giant had an emergency. They needed five IBM PC/XTs. By Tuesday. Orelse.

"The XTs were then on allocation," recalls Selecterm chief executive officer Phillip Ciolfi, "and nobody in the whole world could get them."

Such are the opportunities on which Selecterm built its reputation. Company executives began to work the phones, searching retail outlets coast to coast for Big Blue's much-sought-after personal computer. And on Tuesday morning, true to its word, a Selecterm demonstration staff appeared at the client's West Coast headquarters, ready to deliver and set up the five machines Selecterm had purchased -- at retail price -- to satisfy a prospective client.

"We charged ourselves, ns sales expense, the difference between our own price on the XTs from IBM and the retail cost," says Ciolfi. "We ate $10,000 -- just to say, 'See wbat you meun to us!'"

And it paid off. Today, just one year later, this client is leasing 97 units from Selecterm. "And they tell us they want 15 to 20 units a month indefinitely, all on the strength of that demonstration."

Such marketing tactics -- selling exceptional support and service to a roster of Fortune 500 companies -- has been the hallmark of Selecterm ever since the company's birth in 1969. Today, after 14 years of slow and steady growtb, those tactics have made Selecterm perhaps the largest third-party supplier of serviced terminals leased into the computer and communication networks of corporate America, with nearly 22,000 pieces of equipment out on 12-month leases to some 700 active clients, with $19.4 million in sales in 1983 and projected sales of $32 million for 1984, and with a steady record of profits between 10% and 11% of sales.

In the turbulent 1970s, mere survival was un accomplishment for a terminal distributor. As computers became ubiquitous, and terminals the necessary nerve endings in the network of webs spun out from them, a roustabout culture of middlemen emerged to sell and service teletypewriters and then video terminals. Hundreds of would be entrepreneurs launched themselves into the business, often with no more than a telephone and a capacity for long hours. Most tried to grow as fast us they could, pushing volume sales while cutting prices, only to die in wave after wave of bankruptcies.

But Selecterm flourished as the courtier of corporate royalty, pricing its product a little higher (or rather, refusing to match the volume discounts of all its competitors), and providing a level of customer support that many other distributors thought excessive and unnecessary. Growing slowly, expanding geographically only when a new office promised black ink, handling fewer products, stressing full-support leases and red-carpet service, Selecterm emerged in the 1980s as the aristocrat of a brawling, cutthroat business.

The market opportunity for the next decade is in distributing the new personal computers that have evolved from the "intelligent" terminals. Here, too, hundreds of entrepreneurs have launched themselves into the business. Here, too, a shakeout seems inevitable. But Selecterm executives remain convinced that their company's strategy will keep them on top.

Selecterm's sleek, ultramodern headquarters in Danvers befit it status asindustry leader. It also has sales and service facilities in nine metropolitan areas across the country. The basis for the company's success was established in its earliest years, however when the business was operated out of a ramshackle warehouse in a low-rent Boston suburb.

When former General Electric Co. sales engineer Phil Ciolfi, then age 29, started a company to lease 10-cps teletypewriters in 1969, he had the knack for gears and grease necessary to service the noisy, slow, and failure-prone terminals of Teletype Corp. that gave voice to many of the early computers. Then, as now, it was service he sold, a promise of "peace of mind" for the end user. His initial clients were such bluechip accounts as Harvard University and Raytheon Co., customers for whom service was more important than price. Ciolfi began by renting Teletypes from other leasing companies and then subleasing them -- with a service contract -- to his customers; all his leases included a purchase option, however, so Ciolfi was able to build a base of capital equipment gradually, financed by money received from his clientele and paid back from cash flow

Three years after start-up, with yearly sales of $698 000 his conservative business plan had interested a venture capitalist, Narragansett Capital Corp. of Providence, which invested $150,000 cash and $150,000 in subordinated debt. That in turn, led the banks to open credit lines for more capital investment.

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