To make the service end of the business flourish, says Theye, "we need high-level technology people." TFN's total payroll, at 1,450, has not changed in a year, yet it now has 650 people in services, 220 more than a year ago. That requires "sizing" the organization, as Miller puts it, reengineering jargon for hiring people with needed skills to replace those whose skills may not be applicable any longer.
In effect TFN is now trying to shift its mix of skilled people just as radically as it once moved from word processors to PCs or from retail customers to corporate buyers. But changing a company based on salespeople to one with greater need for technical people can't really be done through retraining. "It's very difficult to convert a product salesperson into a services consultant," says Mike Melenovsky, director of business-service strategies at International Data Corp. (IDC), a research firm. "It's like trying to take a used-car salesman and make him a management consultant."
Of course, as has been true throughout its profit-chasing life span, TFN isn't exactly boldly going where no competitors roam. The kinds of employees it wants to recruit are very much in demand. "This has always been a predatory industry when it comes to people," acknowledges Carolyn Ruech. In the past competitors lured away superstar salespeople who brought their customers with them. Now they home in on technical people.
But Theye is not exactly unfamiliar with that kind of fierce competition. No matter how his business model has shifted, he has shown no fear of crowds, whether in battling for PC customers or negotiating the switch to services. TFN and its competitors "face the same issues," says Traci Bair, senior analyst for IDC. "They have all been looking to carve out a niche in services, which in certain areas will be more competitive than hardware sales." According to Melenovsky, TFN's move into services will soon bring it into uncomfortably close proximity to such giants as EDS and Andersen Consulting. "The Future Now's greatest strength is that its management has a vision, but it still needs to identify its buyers," says Melenovsky.
For Theye that means only one thing: there's yet another business model on the horizon. And if he knows what it will look like, he's not telling. But he keeps the bigger picture resolutely in focus. With the IE merger, and mergers like it between other distributors and resellers, the industry has begun to consolidate yet again. Theye hopes that signals a threshold at which margins will begin to stabilize, the service business will find its niche, and IE will flood the pipeline with hardware. "That will be an end point," he says, sounding half-convinced.
Theye has now moved out from behind the big desk in his quiet and uncluttered office to sit at an oval-shaped table. He forms a portrait of composure that contrasts with the carnage in his industry. Ask him about all the uncertainty and he is not sad, not glad, not mad. He could just be numb.
He's only too aware of how Wall Street views his efforts. Kevin Morrow, an analyst with the Ohio Co., a regional brokerage in Columbus, is hardly dazzled by the IE deal. "There's nothing really to get excited about here," Morrow says flatly. He notes that TFN got a good deal -- with IE's backing, it can look beyond the next few quarters. "But for TFN shareholders this was not a good deal," Morrow adds. "IE paid no premium for the stock. TFN will gain strength by becoming a division of IE, but it will lose its public identity. Terry Theye obviously decided he'd rather be a survivor than a nonentity."
Surviving, it turns out, is what Terry Theye is all about. After all, for 20 years he's been struggling to build solid value into his creation. By now Theye ought to be confidently sitting back in his well-appointed office, recounting the big IE win, among others, and thinking of hitting the golf course. Instead, he can only laud his endurance skills. "We've survived so far," he says matter-of-factly, "but there's not a lot of time to sit back and congratulate ourselves."
WINNING UGLY
The numbers are not pretty, but then the Future Now Inc. (TFN) operates in a less-than-glamorous environment. "The whole industry is ugly," says Kevin Morrow, an analyst with the Ohio Co., a regional brokerage based in Columbus. Still, Morrow expects TFN to survive, despite margins that could shrink by at least 25% this year. "TFN will make it," he explains. "It has a large customer base, it's growing its professional services quarterly, and the best thing it has going for it is its tie to Intelligent Electronics." Here's how the company has fared in recent years.
Revenues (in millions)
1991: $138.7
1994: $811.1
Net Income (in millions)
1991: $3
1994: ($41.5)
Net Margin
1991: 2.2%
1994: (5.1%)
Stock Price
12/31/91: $10.25
12/31/94: $4.50
Total Market Capitalization
1991: $30.4 million
1994: $34 million
NOTES: 1994 revenue, net-income, and net-margin figures are based on estimates by the Ohio Co. The 1994 net loss includes a $40-million restructuring charge, which TFN took in the second quarter of 1994. n -- Stephanie Gruner
