Downsized & leaned up, MicronPC aims to grow

MicronPC, successor to the former Micron Electronics Inc., has a new approach to selling computers – “getting in front of the customers.”
In some cases, managers from CEO Michael Adkins on down are on deck to greet commercial buyers of Micron-branded PCs, present the products, explain the service and support system, and even show them around the 260,000-square-foot plant.
“In October through November (2001), we had over 100 customer visits,” Adkins said. “If we can get them to our facility, we have a 90 percent closure rate.”
The personal touch, according to Adkins, is one reason MicronPC of Nampa has earned a profit for its new owner, Gores Technology Group of Los Angeles, during the past two quarters.
How much of a profit, Adkins and privately held Gores won’t say, but “from where we’re sitting in January and February, we’re relatively bullish,” Adkins said last week.
The possibility that one of Canyon County’s largest private employers may begin rehiring some of the 600 workers laid off last year is anticipated – depending on market factors – in the second half.
Today the company – now MicronPC LLC – employs about 1,000 in one of the two plants built for Micron Electronics in the mid-’90s, when it was trying to match industry leaders like Dell and Gateway in the direct-order PC market.
At peak, in 1998, Micron Electronics employed more than 3,200, of whom 2,400 worked on the PC side of the business.
But competitive factors, the Tech Wreck and the recession, sent MUEI (its erstwhile Nasdaq stock symbol) into the tank. In May 2001, Micron Tech unloaded the loss-plagued subsidiary to Gores, tying the knot with a $70 million dowry.
Adkins, 37, a Micron Tech veteran (1986) who had transferred to MUEI in ’96 to oversee memory-recovery unit SpecTek, had become senior vice president at Micron Electronics, and was named president and CEO.
“This was a pretty unique situation for Gores,” he said. “The management team stayed in place, whereas with most acquisitions, they end up putting in a team of Gores personnel.”
Gores, he said, “has allowed us to run the company the way we feel we need to run it,” albeit “with some pretty tight controls” on costs.
“We run the leanest operating expense model in the industry,” Adkins added.
Gores – known for its rescue of The Learning Co., among others – instituted austerity measures that included downsizing and rigid oversight on expenses and travel, along with the layoffs.
“Gores Technology Group is just a bunch of reality managers,” an article in the February issue of Business 2.0 quotes Gores President Jim Bailey as saying. After nearly $200 million in losses, the reality was that MicronPC needed to downsize.
By last October, MicronPC said it had achieved profitability, and in January it said it had repeated that feat in the fourth quarter.
“The year 2001 was one of tremendous change and turnaround for MicronPC,” the company said in a January statement that attributed success to “focusing on select segments” of the PC market.
The old Micron Electronics attempted to sell to everyone, but despite repeated recognition for its designs in the trade press and a spirited national advertising campaign, it achieved only a miniscule share of the broad PC market – reportedly little more than 1 percent.
“One of the things this company always struggled with was brand awareness,” Adkins recalled. “We had single-digit brand awareness, while Dell and Gateway had upwards of 45 to 50 percent brand awareness.”
With the failure of that broad frontal attack, then-CEO Joel Kocher – who succeeded Joe Daltoso in 1998 – pursued a strategy of turning MUEI into more of an Internet company, and attempted to bolster morale with upbeat rhetoric and, in October 1999, even a stunt that involved riding a motorcycle in front of the 2,700-strong workforce at the Idaho Center.
Such grandstanding didn’t cut it, and last year, Kocher went with the company’s Web-hosting division, HostPro, to Interland Inc. in Atlanta. Adkins stayed.
In the last two years prior to Gores, “we had lost our focus,” Adkins said. “What I learned, and what the management team here has put into practice, is to truly focus the company.”
The company has focused on two primary markets: Government, and small to mid-sized businesses, typically ranging from 100 to 5,000 employees. The later is “a segment largely served in the past by resellers,” Adkins noted.
“We do exceptionally well in government – we’re the No. 2 provider on the GSA schedule,” he said, referring to a General Service Administration ranking of PC providers to federal governmental entities.
Marketing to business targets commercial IT purchasers through appearances at trade shows and “customer-facing events” such as the presentations and plant tours.
“It’s a good opportunity for us to have them captive for a while and to show them our capabilities,” he said. “It allows us to establish a relationship face to face.”
This “red carpet” treatment goes even to relatively small companies. “If they’ve got $50,000 to $100,000 a year in terms of IT spending, clearly they make our radar,” Adkins said, and added:
“Getting in front of customers – I’ll do that all day long if that’s what it takes.”
How does MicronPC expect to beat the competition in this segment? “Our level of service is unmatched by other manufacturers,” according to Adkins. “It’s really the big reason we’ve made a successful transition from a public company losing $100 million a year to a smaller company that’s definitely leaner, but it’s profitable.”
Service is delivered on a person-to-person basis “through dedicated account representatives,” the company said.
MicronPC continues to serve a “residual” market of individual buyers among “a very loyal following of tech-savvy users,” he said. But today the company derives only 10 percent of its sales from consumers, compared to 80 percent for the old Micron Electronics.
That the company no longer targets mass markets may make it easier eventually to drop the Micron brand name.
While neither Adkins nor spokesmen for former parent Micron Technology would comment directly, there was talk at Micron Tech’s annual meeting last November that the transfer to Gores included provisions for phasing out the Micron brand on PCs.
“I can’t provide details … about their name change,” Kipp Bedard, Micron Tech vice president of corporate affairs, said in February, citing confidentiality.
“Our plan is to continue to use the Micron name through the balance of this year,” Adkins said, declining to elaborate.
Regarding its tradition of technological prowess, he said MicronPC “continues to lead the industry in winning product awards” from PC World and other publications.
Last week, the company introduced a new laptop, the GTransPort GX3 – equipped with a relatively new fingerprint security system, and one of the first laptops to contain Intel’s latest superfast processor, the Pentium 4.
An industry analyst, Roger Kay of International Data Corp., was quoted in a published report as saying the GX3’s leading-edge technology “speaks well for the continued viability of the company.”
The future, as always, depends to large extent on market dynamics – and the strength of the economic recovery expected this year.
Asked whether MicronPC plans to hire, Adkins said: “We can’t make guarantees, but … if the economy and the industry were to rebound, that would be the expectation.”
The company pays production workers make $8.50 to start, and spokesperson Michelle Casey said “benefits are an important area for us.”
This year, MicronPC “chose to absorb 100 percent of our health-care cost increases rather than pass them on to our employees,” and it offers profit sharing to all employees, Casey said.