By PETER GRIFFIN
There's a big, red barn beside the highway through the industrial heart of Hamilton.
It's not yet another branch of The Warehouse, but the company operating out of it has a lot in common with Stephen Tindall's big red retail chain.
This is a company that also began with one discount store, a family business that grew to become a household name, guided all the way by a down-to-earth Kiwi bloke.
Inside the big, red barn, PC Company founder Colin Brown watches a batch of computers make their way along a conveyor.
The place oozes efficiency, pop music mingling with the metallic sounds of assembly.
Brown reckons he can churn out at least 3000 PCs a month, with a single shift of eight hours a day. It's all part of the buy-direct model he's been fine-tuning for the past few years.
By taking a low-cost approach, the PC Company has grown to employ 150 people, turns over more than $60 million a year and makes a profit. Last year it sold 23,000 computers.
For the three months to the end of June, the company sold 7000 PCs, making it number two in the market, according to researchers IDC.
Admittedly, the PC Company's rise to the number two slot was helped by the merger of rivals Compaq and Hewlett-Packard, which effectively removed one competitor from the rankings. Still, the local company outsold IBM and even Dell, a company that also grew rapidly using a direct sales model.
All good reason for Brown to smile - but right now he's frowning: someone on the production line isn't wearing an anti-static wrist band.
Originally Brown intended to make his fortune selling furniture, not PCs.
He and wife Keryn moved to Hamilton in 1976 to open a discount furniture barn, giving up their 32-acre block in Akatarawa, north of Wellington, and his job as a trader for an import and export company.
The plan started to change when Brown bought a PC to keep track of hire purchase agreements.
"I owned the furniture business and made the ultimate mistake of buying a PC without the software installed," he explains. "I had to figure out how to develop a software package to run on the computer. But it started a fascination with computers. I was hooked at that point."
Brown opened a computer section in his furniture barn selling early "Vic 20" machines from manufacturer Commodore. As sales grew, computers became the main focus.
Brown formed a company called Pegasus in 1982 with the aim of wholesaling PCs to other retailers. Pegasus evolved into the PC Company in 1997, just before dominant rival PC Direct was sold to US company Gateway.
The PC Company slid comfortably into the gap, quickly becoming the biggest of the home-grown PC sellers as Gateway lost its way, finally pulling out of New Zealand last year.
IDC market analyst Darian Bird says that, all along, the PC Company has successfully exploited "buy Kiwi-made" sentiment.
"They've made sure they keep that Kiwi image with rugby players in their advertising, that sort of thing."
As it sold more computers, the PC Company was able to negotiate better terms with component suppliers, undercutting the multinational PC makers on price.
"They're a local manufacturer, but they're big enough to have close relationships with the likes of Intel, AMD and Microsoft, and that really helps," says Bird.
But assuming PC Direct's mantle as the largest local PC assembler was far from straightforward. Brown's plans were twice held back by business deals that went wrong.
He left $100,000 in his furniture business - a tidy sum in the early 1980s - when he sold it to concentrate on being a fulltime PC wholesaler. That was the last he saw of the money.
"It was our first bad debt. We ended up never getting paid for the business we sold, and we were in the midst of getting the PC business going."
It meant there was less money to get Pegasus up and running, but Brown struggled on.
Disaster struck again in 1998, by which time Pegasus was a thriving PC wholesaler. Brown had formed a partnership with Auckland PC retailer Best Buy, which soon resulted in that company taking three-quarters of the PCs Pegasus supplied.
With the PC boom in full swing, Best Buy grew quickly despite strong competition from PC Direct. Brown says he and son Aran spent a straight 72 hours awake over Christmas 1996, "working our butts off" to process orders that had built up in the pre-Christmas sales rush.
But it wasn't to last. Best Buy collapsed in July 1997, leaving hordes of angry customers demanding their money back and Pegasus $450,000 out of pocket - even though Best Buy turned over $10 million in its first 10 months.
Brown says he wore the loss despite dealing with Best Buy on tight credit terms.
"That really hurt, it took another 12 months at least to recover. Our manufacturing process was geared up and then we didn't have our major customer."
Pegasus dipped into the red for the first time after the Best Buy collapse, but it spurred Brown to resurrect plans for his own retail PC operation, similar to Best Buy and selling direct to the customer.
"While I was disappointed we lost all that money, at the same time it was a revelation to us to discover just how big the market out there was."
He points out that less than 50 per cent of New Zealand households have a computer, compared with 70 per cent in the saturated US market.
But strong competition and tighter margins on hardware mean the PC business is not what it was.
The heady days of the 1990s when a company such as PC Direct could sit back and squeeze a mountain of cash out of the consumer market aregone.
"Back in those days, there was nothing like the competition there is today," says Brown. "I don't think we've got the brand recognition yet that PC Direct had, even though our numbers are larger."
Although Brown says the PC Company is going through its best period yet, he is acutely aware of the need to diversify.
From next month, the PC Company will become an internet service provider, offering customers 100 hours of dial-up internet access a month for around $18. The service, branded PC Connect, is being provided by Hamilton internet provider Wave Internet, with PC Company help desk staff providing technical support.
Brown figured that he had 70,000 customers, many of whom might have taken up the offer of an internet connection if it was bundled with the PC package they purchased.
Hand in hand with the launching of the internet provider is the arrival of PC Essentials, an online hardware store where PC owners can buy everything from extra memory and video cards to CD writers and printer cartridges.
"You buy the PC from us, if you want to upgrade it, go on to our site, check to see what you want to buy, take your PC into our store," explains Brown.
"We get the components shipped to the store and install them for you if you want or you can do it yourself."
Like most things the PC Company does, PC Essentials will be a low-cost operation, though Brown says up to four new staff will be taken on to run the internet provider.
Still, those areas of business will contribute less than 10 per cent of revenue, he says.
Making inroads into the lucrative business market - the traditional domain of the multinationals - is his next line of attack.
Despite taking 7.4 per cent of the PC market (according to IDC's figures), Brown points out that the PC Company is playing in only 40 per cent of the market - the proportion accounted for by home PC buyers.
"The business market is a relatively virgin market for us. Having said that, probably 15 per cent of our orders go to businesses."
It is an essential move if the PC Company is to maintain its high growth, says IDC's Bird.
"Half the reason Gateway had to leave the market was because they were almost solely focussed on the consumer market.
"Average prices are coming down, so you might sell more units but you're not getting more revenue out of it."
The business push has seen the PC Company offer specialised business machines, servers and, more recently, laptops.
Leading the charge into the business market is former Broadcast Communications chief Rob Sweet and the former Australasian head of Seagate Technology, Dale Townsend.
The 52-year-old Brown has been stepping back from the day-to-day running of the business after more than 20 years of hands-on leadership.
It won't necessarily give him more time to play squash or stroll around his Cambridge farm.
"No rest yet. I'll be just as busy, or busier, working on our strategic plan and new ventures," says Brown, who will still be product manager.
The modest businessman remains as passionate as ever about technology and optimistic about a PC market that has taken a battering in the past couple of years.
"We have to make sure we never do a PC Direct," he says.
"Get to the stage where we can't put an offer on the market because our overheads are too high.
"Our biggest enemy is ourselves."
High-tech heartland
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