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When business turns sour, a natural inclination is to protect your market position. Most companies scramble to save cash, even at the expense of developing new products. But a downturn may, in fact, be a time to focus on product development, as Dallas-based Interphase Corp. has discovered.

Interphase had seen significant annual sales gains until early 1985, when industry demand for its disk and tape controllers for 16-bit microcomputers suddenly slackened. Many of the company's competitors responded by slashing expenses. Interphase, however, boosted research-and-development spending from about $700,000 to more than $1 million and invested an additional $500,000 or so in gearing up for production. The expenses didn't help 1985 profits, which fell more than 60% from the previous year. But they did permit Interphase to beat other companies to market with a new line of products for 32-bit computers. Sales of the new products now account for half of the company's revenues.

"If you have a hunch about where things are going," advises Interphase president Michael E. Cope, "you're better off making a move. Otherwise, you'll be forced to play catch-up. And if the business is anything like ours, it takes a year to develop a product."

Last updated: Nov 1, 1986




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