THESE PCs ARE MARKED `CLONED IN AMERICA'
In Pennsylvania's Lancaster County, Amish farmers still work the land with rakes and hoes. Black buggies bump along back roads. And many homes don't have such newfangled amenities as televisions and telephones. It's not exactly Silicon Valley.
But here among the simple folk sits a sprawling high-tech factory, home of Cardinal Technologies Inc., a tiny personal computer company with a billion-dollar ambition. It's not your typical PC upstart. There's no computer-crazed entrepreneur a la Steve Jobs. Instead, it's headed by seven middle-American, mostly middle-aged veterans from RCA Corp. Another difference: Cardinal designs and builds its machines in the U. S. instead of farming the work out to an offshore clone factory.
NATIVE KNOWHOW. Being different hasn't hurt. The company grew to $34 million in revenues in three years by building PC add-ons for companies such as Xerox, Intel, and IBM. Last year it broke even, and in 1991 it expects a $2 million profit on $55 million in sales (chart). Next month, Cardinal plans to start selling Cardinal-brand PCs. If all goes according to schedule, the company plans an initial public offering next summer. After that? "We hope to be a billion-dollar company very soon after 1995," says Harold R. Krall, Cardinal's chief executive.
Cardinal came about almost by accident. When General Electric Co. bought RCA in 1986, one of the first RCA operations to be put on the block was the Lancaster-based New Product Div. All seven division managers had spent more than 20 years in the area. Five were natives. All wanted to stay. They figured they could use the equipment at the facility and launch a computer startup. "Between the seven of us, we already had all the skills that it takes to start and run a company," says Krall, who spent 22 years at RCA.
The partners raised $1 million and bought the division's assets in March, 1987. They got a 92,000-square-foot building, CAD/CAM systems, and some manufacturing equipment that GE tossed in from other facilities. "Essentially, what we got from GE was a jumbo jet with no passengers," says Raymond Sobieski, Cardinal's chief financial officer. The name was chosen to reflect the idea of the cardinal rule and because it wasn't high-tech mumbo jumbo.
The startup launched aggressively into a bottom-up strategy. "We wanted to be competitive at the lower end and then go on to higher products such as full systems," says John L. Stevenson, vice-president for manufacturing. Starting with modems, the company worked up to keyboards, add-on graphics cards, then monitors. "Most American companies are nothing but marketing companies, which manufacture overseas and then essentially sell the products," says Krall. "We wanted to avoid that." By making all these components, he says, Cardinal gained control over design, engineering, manufacturing, and marketing--something few clonemakers have.
By early 1989, Cardinal was ready for complete PCs. It signed a seven-year contract to build clones for Leading Edge Products Inc., a distributor based in Westboro, Mass. But the deal backfired late that year when Leading Edge was forced into Chapter 11 and acquired by its chief creditor, Daewoo Corp.
MAC MIMIC. The experience convinced Cardinal that it was better off on its own. The result is the IBM-compatible PC10, which starts at $995. Its major distinction in a sea of IBM clones: It has a one-piece case that makes it look like the Apple Macintosh Classic. It also comes with Microsoft Corp.'s Mac-like Windows 3.0 graphics software. Like the Mac, the Cardinal PC comes with its basic software installed so that buyers can simply "plug and play."
The company's challenge now is to land shelf space for the PC10 in computer stores. Cardinal figures it may interest big dealers in its plans to leapfrog straight into the nascent market for multimedia computers. The company is developing a line of multimedia PCs that will come with high-level graphics and full-motion video capabilities. A $1,000 multimedia imaging card for the Cardinal PCs and other IBM compatibles is due by yearend. "We believe multimedia is going to be the next big market for the 1990s," says Krall, "and we want to be there when it happens."
After that, Cardinal wants to crack the tough Japanese market. The company has already set up an office near Tokyo, and it may build a plant there, too. But Cardinal executives say they'll never move away from their beloved Lancaster--no matter how far off the beaten path it may be.Sunita Wadekar-Bhargava in Lancaster, Pa.