ARCHIVED  June 1, 1997

Applied Computer moves fast into future

FORT COLLINS – “I deal directly with the future,” says Bud Prentice, president and chief executive officer of Applied Computer Technology Inc.

Judging by the speed with which ACT has moved from a small private company to a medium-sized corporation publicly traded on the NASDAQ exchange, Prentice, 33, deals well.

In the past year, Applied Computer Technology has acquired two Internet service providers, opened four new locations, and become the first vendor to receive all three U.S. service academy contracts to supply computers to all first-year students.

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Taken together, these accomplishments reflect the way Prentice deals with the future: Keep the company structure flat, stay on the edge of technology, leverage good contracts for better ones, watch your margins, and grow.

Prentice attributes winning the service-academy contracts, at least in part, to his company’s flat structure. As both CEO and person whose job – and passion – it is to keep up with the latest technology, Prentice was able to make fast marketing decisions impossible in a highly layered company.

“The academies announce a cost per computer that each incoming freshman will receive and then keep for four years. The ‘hat trick’ in my bid was the Pentium II cartridge that replaces the Pentium chip. It’s not that my 17 competitors couldn’t have known about Pentium II, it’s just that they are so layered that the advance information didn’t get from the technical side to the bidding side.”

Assuming that the military would want its elite to have the most-advanced computers possible, Prentice took a chance in being the only vendor to offer Intel’s newest technology. He was right, and so for the first time, the incoming classes of all three academies will be working off the same platform from the same vendor.

The leverage of success has already proved useful: He has secured a five-year contract from the University of Oklahoma, and is in a strong position to compete for a separate 20,000-unit contract, a $40 million deal.

One bidding technique that Prentice uses that makes him a formidable competitor is to establish his own margin for profit and then to work back from there.

“After I had won the contract with the Air Force Academy for the first time [in 1995], the price of some of the components went down. So I kept my margin and gave them a package of add-ons. That kind of approach builds customer loyalty.”

ACT’s growth over the last five years has an air of inevitability to it, but the process of growth is rarely easy.

“Each growth spurt causes a shakedown,” he said. “We have to deal with cultural changes, payroll considerations, and decisions about direction. Employees don’t think I agonize over the kinds of changes that affect their lives, but I do.”

The most recent spurt and shakedown occurred when ACT went public in October 1995.

“When we knew we needed capital to grow, it seemed natural to go public. I see being on the NASDAQ as dealing with another kind of lending institution. Instead of reporting to a bank, we report to shareholders. The accountability is the same.”

With the capital raised from the public offering, Prentice upgraded the company’s internal information systems to handle the demands of being a medium-sized corporation. ACT opened four additional locations and created NetAccess, an Internet service provider.

One result of the expenses incurred with ACT’s transition was a net loss of $1.3 million in 1996 as compared with a net profit of $535,000 in 1995. But Prentice sees the losses as momentary and expects the price of shares, now trading at $2.62, to get a good bounce from the Oklahoma contract.

“NetAccess will be profitable by the end of the year, and the gross revenues from the service academies will be approximately $7.5 million,” Prentice said. All three contracts are scheduled for delivery in August 1997.

When asked about the nature of future expansion, Prentice explains that it will probably look a lot like what has brought the company to this point: offering government, corporate and educational clients systemwide computer “solutions,” made up of hardware, prepackaged software, and a suite of services including training, Internet service, network design, and maintenance. Individual users will still be able to buy computers from ACT, but they will not be a target market.

“We want to empower our clients. So we train them to use what we have designed. That empowerment improves productivity for their companies and makes us more profitable.”

And while Prentice operates globally, he has no immediate plans to market his products internationally.

“We have an office in Hong Kong because we do much of our sourcing from China, Taiwan and Korea. In the future, we may deal with Singapore as well. But because we concentrate on clients who buy hundreds of units and a suite of services that we support on-site, actually marketing internationally would require different capabilities.”

When Prentice reflects on the last 13 years, he thinks less about good or bad decisions than about milestones.

“The first milestone was when I arrived home one evening and there were six people I didn’t know waiting for me, wanting me to build them computers,” he said. “I was still a student at CSU, but since my apartment was filled with computer parts, it was time to get an office.”

With borrowed money, Prentice rented a small space in Campus West and worked until opening day painting and laying carpet.

“I figured that I needed to sell six computers in the first month to break even. I sold six on opening day,” he said.

Since that time, Prentice and partner Cynthia Koehler, executive vice president, have ridden the crest of the computer wave. Prentice loves the technology and the speed of advances, but he admits that this business is not for the faint of heart.

“You have to have a willingness to flow with the volatility of an industry that has weekly publications which report on daily changes,” he said. “I like the risks, and I like the hunt.”

He sweeps his hands over a freshly opened circuit board that sits in its box looking like an electronic pizza.

“Next year all this will be different,” he said.

Now that Prentice has arrived in the realm of mid-sized business traded on the National Association of Securities Dealers Automated Quotations exchange and with profitability on the horizon, he has a fresh deal for the future.

“The next plateau is to become a $100 million company,” he said. “It’s a possibility that we will be there in the next 20 months.”

FORT COLLINS – “I deal directly with the future,” says Bud Prentice, president and chief executive officer of Applied Computer Technology Inc.

Judging by the speed with which ACT has moved from a small private company to a medium-sized corporation publicly traded on the NASDAQ exchange, Prentice, 33, deals well.

In the past year, Applied Computer Technology has acquired two Internet service providers, opened four new locations, and become the first vendor to receive all three U.S. service academy contracts to supply computers to all first-year students.

Taken together, these accomplishments reflect the way Prentice deals with the future: Keep the company structure…

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