Time to pile on some more debt.
Published Wednesday
January 05, 2000
Inacom's Leaders Go East
BY ED RUSSO AND STEVE JORDON
WORLD-HERALD STAFF WRITERS
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Inacom Corp.
The chief executive of Omaha-based Inacom Corp. said Wednesday that the company will move its corporate headquarters to the East Coast so it can attract the executives it needs to change the way it does business.
Inacom CEO Gerry Gagliardi
The move, expected to take place by the end of March, is the latest bad news from Inacom, a $6 billion (annual revenue) company that has about 1,400 employees in Omaha among its worldwide work force of more than 10,000. It's one of only six Fortune 500 companies that are based in Nebraska.
The company, which is expected to continue operating at a loss throughout 2000, has struggled in its effort to shift its emphasis from low-margin computer sales to higher-margin computer services. Inacom previously announced that it would cut 1,000 jobs across the country and shake up its management team as part of a corporate restructuring.
Tuesday, Inacom announced that it will sell its advanced computer distribution plants in Omaha and four other cities to Compaq Computer Corp. for $370 million in cash. The sale will make 2,500 Inacom workers across the country, including several hundred in Omaha, employees of Compaq.
Wednesday, Inacom CEO Gerry Gagliardi said that Omaha was the perfect headquarters for Inacom when it rose to prominence as one of the largest customizers of personal computers for businesses, but that has changed. He now plans to move the headquarters to an East Coast city, which he declined to name, within the next three months.
Inacom, a spinoff from Omaha-based Valmont Industries Inc., grew into one of the nation's largest sellers of customized desktop computers used by businesses. Its distribution centers, where it customizes computers to suit clients' needs, are among the industry's best, but shrinking profit margins on computer hardware sales have left the company struggling to reinvent itself.
A central location was ideal for Inacom when it was shipping computers around the country, Gagliardi said, but the company now is becoming more services-oriented and, as such, needs to attract different types of executives to help run it.
Gagliardi said it will be easier to attract computer services executives to the East Coast than to the Midwest.
"It's nothing negative about Omaha," he said, "but that is the facts. You've got to move the mountain to Mohammed."
Before being named Inacom's CEO in October, Gagliardi worked as an executive with Unisys Corp. in Blue Bell, Pa. He's a Connecticut resident.
Company spokeswoman Geri Michelic said many corporate headquarters employees will remain in Omaha, though she could not give an exact number. Only about 100 executives and their support staff will work on the East Coast, she said.
Michelic said there will be several hundred employees working in such corporate offices as marketing, information technology and human resources. These departments will probably continue operating from the current headquarters building, at 10810 Farnam Drive.
Gagliardi said Compaq has agreed to hire all of Inacom's employees who worked in its distribution operations. Compaq "has an exceptionally good benefits package, in some cases better than ours," he said. "Our employees who are going to go over to Compaq will be treated very nicely and very fairly."
For Omaha, the Compaq sale should not mean a job loss in Omaha, he said. "I believe this is a positive thing for Inacom as a company, for Inacom's employees and Omaha. All three will be much healthier as a result of this (Compaq) transaction.
"Would you rather have a depressed company located in Omaha or a company that is flourishing and growing?"
Reacting to the news, Al Wenstrand, director of the State Department of Economic Development, said: "My first gut reaction, other than feeling sick to my stomach, was that we need to see if there's any thing we can do to not allow that to happen. But if the decision is made, it would be a terrible loss to Omaha and Nebraska.
Beyond the loss of a corporate headquarters and the jobs involved, he said, the move could damage the state's image as a good home for technology-based companies.
"This is the type of company that we've been using as an example of leading technology," Wenstrand said. "This is the future, this is the type of jobs we want in Omaha and in Nebraska."
He said he has a tough time believing that Inacom could not attract the right executives with an Omaha headquarters, since other companies have done that successfully.
"Image is a problem for Nebraska," Wenstrand said. "That's one that we continue to work on, but it's a long-term issue.
"We're not going to run to the Legislature and say we need to change what we're doing. It's a setback, but I think it's a setback that's associated with labor availability and image."
Improving the state's image as a good place for high-technology businesses will be "a dominant issue for 10 or 20 years," Wenstrand said.
"It's not a crisis, but this obviously is not good news," he said. "We hate to see them go."
Robert Bell, president of the Greater Omaha Chamber of Commerce, said Inacom's decision is not positive, but it is important to note that many of its jobs apparently will remain here under Compaq.
"It's a loss," Bell said. "But the fundamental company that made up Inacom to begin with was in distribution and design, and for the most part, that's staying right here."
He said he did not think the decision reflects on Omaha but is due to the larger population of the East Coast. "For those that come to Omaha, most of them stay or want to stay," Bell said.
Omaha is continuing to work on its image as a city where "intellectual capital goes to work," Bell said. "I think that image is building."
One proper response to Inacom's decision would be to move ahead with plans for a downtown arena and convention center, he added.
"Omaha needs more opportunities for those who are here for entertainment and sports and other events," Bell said. "We need a living room."
Another factor in Inacom's decision, Bell said, is that its new CEO comes from the East and apparently wants to return. "He goes to a place where he's comfortable," Bell said. Often a single individual has influence where a company locates its headquarters.
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