'A new foundation'

Now public, MPC plans for growth beyond PC sales

Making the deal

THE ACQUIRED

MPC Computers LLC

Headquarters: Nampa, Idaho

2004 revenue: $428 million

2004 loss: $6.2 million after a $4 million fee paid to its previous owner

Leadership: Mike Adkins, president and CEO

Lines of business: Computer products and services, aimed at government agencies and mid-sized businesses

Top 100 rank: 39

THE ACQUIREE

HyperSpace Communications Inc.

Headquarters: Greenwood Village, Colo.

2004 revenue: $132,000

2004 loss: $996,000

Leadership: John Yeros, chairman

Lines of business: Software that accelerates Web and client-server applications

Ticker symbol: HCO

52 week high/low: 1.21-8.49*

*HyperSpace stock hit its 52-week high the week after the deal for MPC closed July 26.

The acquisition is a new "springboard for us as we look to continue with the successes we've had in the government market." ? Michael Adkins, MPC Computers LLC

How does a company with revenue of less than $1 million per year acquire a company with revenue reaching nearly $430 million a year? The small company has something the big company wants.

In the case of the acquisition of MPC Computers LLC by software developer HyperSpace Communications Inc., the deal came together because HyperSpace is publicly traded, and MPC officials wanted once again to become a public company, said MPC's Chief Executive Officer Mike Adkins.

"It made the most sense for us ? recognizing the opportunities in front of the business and our desire to continue to grow it ? that we looked to effect a change of control," said Adkins, who will continue to run MPC.

From 1995 to 2001, MPC was a publicly traded company. A technology investment firm bought MPC in 2001, and the PC maker remained a private entity until the recent transaction.

MPC's managers want the company to grow, and believe that it can best do so as a publicly traded company, Adkins said. MPC's investment-firm owners were interested in managing the company from a financial perspective, not a strategic view, he said.

"Their business model is clearly one that looks to their portfolio of companies," Adkins said. However, "it doesn't necessarily support an environment where investment of what they made is put back into the company."

That desire to grow MPC led to the deal with HyperSpace, which agreed to issue 4.3 million shares of stock to acquire MPC from Gores Technology Group.

"What it really means for MPC is that we are now part of a public company," said Ross Ely, MPC's vice president of corporate marketing and public relations. "The big advantage is it gives us access to the public market, so we can go after funds to really grow the company."

Those tracking MPC's progress should expect to see the company make investments on the products side and the services side, Adkins said.

"It is the expectation of the management team, as well as the board of directors, that the money generated within the business will be used to grow the business versus being funneled upstream," he said.

MPC officials would like to see more purchases such as its 2003 acquisition of the End User Division of Omni Tech Corp., a small, Midwest PC company. Focused on the education and midmarket commercial space, its strategic focus was a perfect fit for MPC, Adkins said.

"We kept all the sales and services intact, and had virtually no customer turnover as result of the acquisition," he said. "But with the infrastructure that MPC has in place, we were able to consolidate all the operations."

Although that acquisition related directly to MPC's core business, selling and servicing PCs, future investments likely will move the company into new spaces.

"We are really interested in growing in the mobile space, and we feel like there is tremendous headroom for us to grow there," MPC's Ely said.

"Servers and storage also has been a great area for us showing tremendous potential," he said. "We feel like with investment, we can really grow in those areas."

The next few years could be an ideal time for a PC maker to grow as Intel Corp. and Advanced Micro Devices Inc. transition to producing dual-core, 64-bit processors, said Mark Stahlman, an analyst at New York investment bank Caris and Co. The new processors should force government agencies and private industry to accelerate their PC upgrade cycles.

"The next couple of years are likely to be much stronger in growth than typical industry estimates," Stahlman said. "We're at the beginning of probably a once-in-a-lifetime, industrywide upgrade."

The move from private entity to publicly traded company is unlikely to change the company operationally, MPC officials said.

"We are a very government-focused PC company. In fact, more than half of our business is with the federal government," Ely said.

MPC, based in Nampa, Idaho, ranks No. 39 on Washington Technology's 2005 Top 100 list. That ranking puts MPC behind only Dell Inc. and Hewlett-Packard Co. among the computer makers on the list, Ely said.

In the federal market, MPC counts among its biggest customers the Veterans Affairs Department, the Army and the Air Force.

Although the company will pursue aggressively recompete contracts to maintain its customers, MPC officials also will try to broaden the company's reach into other agencies. One way to do that is to try and sell more products through channel partners.

The company makes about 10 percent to 15 percent of its sales through the channels, Ely said. Direct sales will continue to be the dominant way MPC sells computers, but look for channels to play a bigger role.

"We feel like that's another great opportunity to grow," Ely said. The company plans "to partner with a lot of the integrators and resellers to make our product available to many more customers."

MPC will continue to operate under its own name and will be a wholly owned subsidiary of HyperSpace.

In 2004, MPC had about $428 million in revenue, with a loss of about $6.2 million. The company has 800 employees. HyperSpace, which has 15 employees, had revenue of $132,000 in 2004 with a loss of $996,000.

"From our perspective, this is a very exciting next step for us," Adkins said. "We believe it is a new foundation or springboard for us as we look to continue with the successes we've had in the government market."

Staff Writer Doug Beizer can be reached at dbeizer@postnewsweektech.com.

About the Author

Doug Beizer is a staff writer for Washington Technology.

Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close
SEARCH
 Top 100 Slideshow
contracts DB

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More

Webcasts