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ENTREPRENEURS
- October 2002 by Claude Hammond Niche Tech
One of Kentucky’s most notable beneficiaries of solid business planning is Pomeroy Computing Resources in Burlington. Beginning in 1985 as a Computerland franchise, the firm has grown to a firm grossing $800 million a year. It is one of the very few high-tech companies that has been profitable every year of its existence. “What sets us apart are a couple of things,” said the company’s CEO, Stephen Pomeroy. “Companies in technology had a lot of capital behind them, but were focused on growth and didn’t give attention to the bottom line. Wall Street was even focused on that for a while. But you have to report to somebody, usually the banks. When you can’t capitalize and meet expenses, you’re in trouble. The companies that are surviving are the ones that flew below the radar.” Flying below the radar seems to be a specialty of Pomeroy Computing. “People became enamored with the growth rates, but now more than ever they’re focused on the balance sheet,” Pomeroy said. “With tech companies, three or four years ago, the balance sheet didn’t come up in conversation very often. Now it’s in the conversation, even when we’re recruiting people. The best IT personnel want to know that we’re going to be around for a while. Investors are starting to look at us again. The economy is starting to rebound, but IT is tending to lag behind that.” The 33-year-old Pomeroy is the son of company founder David Pomeroy. The elder Pomeroy has made sure that his son gained experience in most aspects of his family’s business. “I always joke that I started as a janitor and now it’s come full circle,” Stephen Pomeroy said. “Started cleaning the stores and delivering products back in the ‘80s and have worked in every aspect of the company. I’ve been a repair tech, was in our sales force for years, then marketing. I started working on the company’s expansion plans in 1994. “My father has a background in the automotive industry and had seen that successful car dealerships were the ones that had built a nice service department. He decided that we needed to add value on top of technology. We focused on providing additional value: installing and configuring computer systems and networks. We built up the service department that emphasizes the customer. We got out of retail in the late 1980s and then decided to focus on Fortune 2500 corporate America.” The new focus on serving companies has paid off for Pomeroy. “The technology and software sales now represent 82 percent of our revenues, but half of our operating profits,” Pomeroy said. “The IT services we perform are 18 percent of revenues but more than half our profit. Five or six years ago, we were half the size and services provided eight to nine percent of our revenues. It’s not like our product revenues have gone down; it’s just that we’ve executed on strategy and provided value to our customer.” Despite the downturn in stock prices experienced by most of the tech sector, the CEO said that his company’s continued adherence to its business plan continues to guide it within the realm of profitability. “We have grown from being a mom-and-pop business selling Apple computers retail to an $800 million publicly held company,” said Pomeroy. “We’re much like a mini IBM Global or a mini EDS. It’s fun to be a part of that and make the transition.” Stephen Pomeroy became CFO of his family’s business in 1997, a position he held until early last year when he became CEO. “I’m a ‘glass-is-half-full’ kind of guy,” he said. “I like what’s gone on the last two years with the tech industries. It’s forced us to reevaluate our team and talent. We’re planning for the future and we’re a better company now as a result. The company is better serving its customers and has cut expenses. To the credit of our people, we had already moved early last year to cut expenses, so we’re not in react mode. When the faucet turns on a little bit, we’re just going to take off. That puts us in a position of strength and in a position to do acquisitions. I get excited about that.” According to its CEO, Pomeroy Computer Resources is looking to acquire companies performing similar or related services. Notably, on Aug. 30th, the company’s wholly-owned subsidiary, Pomeroy Select Integration Solutions, acquired Verity Solutions LLC, a Cleveland-based IT solutions and professional services provider. Verity’s annual revenues have been in the $1 million range, as compared to Pomeroy’s $809 million for the year ended Jan. 5, 2002. “As far as acquisitions go, our focus is companies that complement what we do on the IT side of things,” Pomeroy said. “We’re not looking at companies with significant product revenues. Specifically, we want to look at creating a presence west of the Mississippi River. “When you do an IT acquisition, you acquire people and relationships. In tough times like this, it’s important that we have a right fit. The goal is to get something done on the next six months, but I won’t guarantee it will happen. We do deals for the right reasons and don’t do them for the right reasons. Some of the best deals we’ve done are the ones we don’t do. This industry is highly fragmented. There are 10,000 companies that have revenue of $200 million or less in this field. We have to be picky. There’s a lot we could do but it’s got to be the right thing. “This firm wants to acquire companies
that desire this sort of merger so they can go to the next level. That’s
how two plus two can equal five.” Claude
Hammond is editorial director of The Lane Report. |
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Copyright 1996-2002, by Kentucky Business Online. All rights reserved. Editorial content
is copyright 2002, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
Stereotypes
can be a bad thing if you’re talking about high-tech companies.
The downturn in the tech sector companies and their stocks prove that
such corporations are not immune to reaping the results of their business
plans (or lack thereof).