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Special thanks to IBD Online for the following:
MIAMI COMPUTER SUPPLY CORP.
Dayton, Ohio Selling The Razor Blades Of
Computer Business
Date: 2/14/97
Author: Marilyn Much
Selling computer supplies may not be the most exciting way to tap into the
high- tech boom. But for Miami Computer Supply Corp., it's sure been
lucrative.
The firm distributes products like printer ribbons, ink-jet cartridges and
computer diskettes mostly in the Midwest and Northeast. It also offers
accessories, including a line of computer projection display products.
With an estimated $62.2 million in 1996 sales, 16-year-old Miami
Computer is the largest independent in its industry.
The company has grown along with the demand for computer hardware.
First, it cashed in on the mainframe boom in the early '80s, and later it
moved to meet the surge in personal computing.
Now, management hopes to benefit from the next high-tech bonanza
-office automation. As more companies embrace new technology, there
will be a corresponding rise in demand for computer and automation
supplies, says CFO Michael Peppel.
Demand for computer supplies is not dependent on the level of computer
hardware sold in a given year, he notes, but rather it reflects the total
amount and type of equipment in use. Thus, the need for supplies is
consistent for an extended time, even after the equipment is no longer
made.
Another boost will come from advances in technology. For example, color
ink-jet printers require more consumable supplies than impact printers, he
says.
In all, the $25.1 billion retail market for computer supplies is expected to
rise at a 6.8% annual rate over the next three years, predicts analyst Ned
Armstrong of Friedman, Billings, Ramsey & Co. He also sees a rise in
business presentation and graphic software requirements.
Miami Computer is a very strong player in this arena, Peppel says. It sells a
full line of projection presentation products, ranging from laser pointers to
liquid crystal displays, a type of flat panel computer screen.
The firm targets mostly small and mid-sized companies with 20 to 100
white-collar employees. It also markets to government agencies,
universities and hospitals.
Miami Computer is more service-oriented than most rivals. It builds close
ties with clients - such as computer network or data managers -via its
direct sales force and customer service reps.
It maintains loyalty by treating customers with kid gloves. The firm offers
customers who spend $40,000 or more annually priority service.
''Our role in the end-user distribution channel is to add value to the
product,'' Peppel said. Members of its 53-person direct sales force are
technical experts, who work with customers to guide, give technical
support and solve problems.
That's unlike rival superstores and other retailers, where sales associates
often act as order takers, Peppel says. Also, since Miami Computer is the
only link in the distribution chain between manufacturers and users, it can
more readily meet deamnd for new products or those that are out of the
mainstream, even if they're in short supply.
This approach has paid off. Sales have soared from $19.6 million in 1991
to about $62.2 million in 1996, estimates analyst Armstrong.
In the 1996 nine months, sales leapt 38% to $44 million from $32 million
the prior year. Earnings surged 73% to 38 cents a share from 22 cents or a
year earlier.
The stock, which trades by MCSC, is priced near 14.
The firm has grown through acquisitions as its fragmented industry keeps
on consolidating. Since 1991, the company has bought four smaller
regional firms in the field, including Diversified Data Products Inc. This
purchase accounted for about 20% of 1995 sales.
Now, as Miami Computer enters its next growth stage as a newly public
company, there are more mergers on tap. All acquisitions add to earnings
from day one, Peppel says.
They also fuel revenue growth by increasing the customer base and
account penetration, and via cross-selling and added product offerings.
Also on tap is geographic expansion, both in the U.S and abroad, where it
now derives a small percentage of sales, Peppel says.
(C) Copyright 1997 Investors Business Daily, Inc.
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